New Delhi, June 5: The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.25%. This announcement was made by RBI Governor Sanjay Malhotra during the much-anticipated monetary policy meeting held from June 3 to June 5. The six-member Monetary Policy Committee (MPC) reached this decision unanimously after a thorough review of the economic and financial conditions. The central bank has also maintained a ‘neutral’ policy stance.
Governor Malhotra noted that the global economic environment has become more challenging since the last monetary policy meeting in April. Ongoing tensions in the Middle East and a fragile ceasefire have led to a sharp rise in energy prices, impacting global supply chains. This situation is affecting both economic growth and inflation.
He mentioned that rising energy costs and supply chain disruptions could increase pressure on economic activities. However, India’s economy is resilient and ongoing efforts are being made to strengthen it further.
Despite global challenges, retail inflation (CPI) remains below the RBI’s target level, primarily because the full impact of international prices has yet to reach domestic markets. Nonetheless, inflation is expected to rise in the coming months and could approach the RBI’s upper limit.
Malhotra acknowledged that inflation-related risks have increased. However, instead of altering interest rates, the RBI has opted to wait for greater clarity on the situation. The RBI will continue to make data-driven decisions and closely monitor inflation and supply-side pressures.
According to the National Statistical Office (NSO), India’s GDP growth rate for the last fiscal year was 7.6%. Strong performance in private consumption, investment, manufacturing, and services has supported this growth.
He added that economic activities in India have largely remained stable despite the tensions in the Middle East. PMI data for the manufacturing and services sectors indicate continued strength, and business confidence remains positive.
The RBI reported that consumer spending, particularly discretionary spending, has remained robust. Investment activities are also showing momentum despite rising costs. In April, India recorded significant growth in merchandise exports, even as global shipping and insurance costs have risen.
The RBI has warned that a potential shortfall in the southwest monsoon could impact agricultural production and rural demand. However, government initiatives such as crop diversification, water conservation, and climate-resilient farming can help mitigate these effects.
Governor Malhotra stated that the ongoing strength in the services sector, positive effects of GST reforms, and relatively stable employment conditions will continue to support urban consumption. However, rising inflation may exert some pressure on household purchasing power.
The RBI has clarified that given the current global uncertainties, rising energy prices, and inflation risks, it will maintain a cautious approach. While no changes to interest rates have been made, future strategies will be determined based on economic conditions in the coming months.
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