RBI Signals Support for Growth as Inflation Outlook Improves, but Caution Remains

India’s central bank is sending a clear message: there’s both the need and the room for monetary policy to help the economy not just recover, but possibly surpass its previous growth rates. Deputy Governor Poonam Gupta, who now oversees monetary policy, emphasized that with inflation easing and the economy showing resilience, the Reserve Bank of India (RBI) can afford to be supportive without risking price stability.

 

The latest data backs up this optimism. The RBI has revised its inflation forecast for 2025-26 down to 3.7%, from an earlier estimate of 4%. Headline inflation in April hit a six-year low at 3.2%, mostly thanks to steady food prices and record harvests. The central bank expects a normal monsoon and strong crop yields to keep food inflation in check for the rest of the year. However, RBI officials are still keeping an eye on possible risks from weather and global commodity prices.

 

On growth, the RBI projects the Indian economy will expand by 6.5% in 2025-26. Still, infrastructure output for April-May grew just 0.8% year-on-year, a sign that some sectors are cooling off after a strong run last year.

 

Despite the positive inflation outlook, MPC member Saugata Bhattacharya and others on the committee are urging caution. Global uncertainty, supply chain disruptions, and volatile commodity prices mean the RBI isn’t in a hurry to cut rates aggressively. The consensus is to move gradually, giving the economy support but staying flexible in case conditions change.

 

Sources: DD News, PIB, CNBC-TV18, Moneycontrol