August 16, 2025

The Reserve Bank of India (RBI) holds firm on its 6.5% GDP growth forecast for FY26 and expects a slight rise to 6.6% growth in the first quarter of FY27. But HSBC Mutual Fund’s Chief Investment Officer for Fixed Income, Shriram Ramanathan, says the journey ahead will be full of bumps. In an interview with ETMarkets, Ramanathan expressed a mix of confidence and caution in RBI's recent policy moves. What’s fueling the economy? "Rural consumption is holding strong," he says, thanks to a good monsoon and steady services. These are like nice tailwinds pushing the economy forward. But on the flip side, urban discretionary spending remains weak, private investments are slow, and the industrial sector is still lagging behind. Looking at the RBI’s monetary policy, things have shifted back and forth this year. Ramanathan explains, "From February’s 25 basis points cut to the 50 basis points cut in June, with changes in stance from neutral to accommodative and back to neutral, the RBI has played it very carefully." The RBI shows it is confident in growth by keeping its GDP estimate steady. But it’s also cautious. Lower interest rates can weaken the rupee, and global uncertainties like tariff tensions and currency pressures add to the worries. Ramanathan sums it up well: "It is a mix — confidence as far as growth is concerned, and caution as far as the currency and other elements are concerned. Overall, it is a very balanced policy." RBI is doing its best to give the economy a steady push. It has pumped liquidity into the system, with over Rs 5 lakh crore in surplus liquidity now available. Plus, a 100 basis point cut in the Cash Reserve Ratio (CRR) is in the pipeline to help the economy more. However, Ramanathan warns that private investment remains sluggish, and urban spending needs a boost. He adds, "The government also needs to be quick, proactive, and nimble in supporting sectors hit by uncertainty and promoting export areas that are doing well." There are global headwinds like tariff tussles and currency moves from other economies that can upset the Indian growth story. So, can RBI and the government keep the economy on track? It’s a tall order. Ramanathan notes there might be some downside risk to the current growth numbers. But the message is clear: policymakers must be ready to act fast when threats arise. As Ramanathan said, it's about balancing hope and caution with steady, smart actions — just what India needs in these shaking times.

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Tags: Rbi, Gdp forecast, Shriram ramanathan, Hsbc mutual fund, Monetary policy, Economic growth,