October 16, 2025

Get ready for some interesting news from the Reserve Bank of India! RBI Governor Sanjay Malhotra has hinted that the September quarter growth looks very strong. He said, "Several indicators suggest that agricultural prospects are bright in the current year; consequently, rural demand is likely to be buoyant." That means our farmers are doing well, and the villages will spend more! On top of that, the "Strong services sector growth and steady employment conditions would support growth," he added. Sounds like good news for jobs and services! But hold your cheers a little! Malhotra also warned that the economy might slow down in the second half of FY26 because of the tough tariffs from the US. Still, he mentioned GST rationalization would help soften this hit. In the RBI's October 1 monetary policy review, they raised the GDP growth forecast for Q2 to 7% from 6.7%, and for the full FY26 year to 6.8% from 6.5%. They expect this growth to be frontloaded, meaning more growth early in the year. The Monetary Policy Committee (MPC), including Malhotra, decided to keep the repo rate steady at 5.50% with a neutral stance. So, no change in the interest rates for now. RBI Deputy Governor Poonam Gupta said there might be some space to lower rates later because inflation is low and growth might slow down. Yet, she said a rate cut now is tricky because: government steps to boost spending are still working; earlier cuts are still affecting the economy; and global uncertainties are changing fast. Inflation news is good too! The Consumer Price Index inflation fell to an eight-year low of 1.54% in September. But Indranil Bhattacharyya, RBI executive director, called this low inflation a "transitory phenomenon" and voted to pause rate cuts because lowering rates now might not work well and could surprise the markets. Ram Singh, an external member of MPC, suggested that cutting rates now could be an "overdose" since past cuts haven't fully worked yet. He supported changing the policy stance to 'accommodative' to make rate cuts more likely later. Another external MPC member, Nagesh Kumar, stressed the importance of extra help for MSMEs like easier loans and credit guarantees. He noted that while US tariffs might reduce growth by 40 to 60 basis points, the impact on MSMEs and jobs could be bigger. (For clarity, one basis point is one hundredth of a percentage point.) So, the RBI team is walking a fine line—cheering good growth now but staying cautious for the future amid global trade tensions. Keep your eyes open; the economic rollercoaster might have some bumps ahead, but also reasons to smile.

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Tags: Rbi, Sanjay malhotra, Monetary policy, Repo rate, Inflation, Gst, Us tariffs,