Most of India’s rate panel sees little room for rate cuts, minutes show

MUMBAI: A majority of members of India’s interest-rate setting panel view current policy rates as suitable for the economy, according to minutes from the February meeting released on Friday, though two members indicated potential for future rate cuts.

Members also await the rollout of a new GDP data series later this month for a clearer read on the economy.

India’s six-member monetary policy committee left the key repo rate unchanged earlier this month, buoyed by a positive economic outlook and trade deals with the U.S. and EU. Economists and swap markets have signalled an end to the rate-cutting cycle.

“Growth prospects are looking up while inflation outlook remains broadly unchanged,” Reserve Bank of India Governor Sanjay Malhotra said in the minutes, adding that recent developments on the external front have “provided room for greater optimism”.

“Given the present state of the economy and its outlook – buoyant growth and benign inflation – I feel the current policy rate is appropriate,” Malhotra said.

India economy to grow 6.8%-7.2% in 2026-27, government forecasts

RBI Deputy Governor Poonam Gupta said that after 125 basis points of rate cuts over the last year, “another rate cut does not seem warranted at this point in time.” The new economic data series could change the reading on the economy, she said.

India continues to grow at a rapid clip with the economy expected to expand 6.8%-7.2% in the financial year beginning April 1.

GDP data for October-December, due to be released next week, will make significant changes including a new base year.

Despite strong growth, inflation in the Asian economy remains low.

Retail inflation stood at 2.75% in January in data under a new series. The central bank has forecast inflation at 4% and 4.2% in the first and second quarters of next fiscal.

Saugata Bhattacharya, an external member of the rate-setting panel, said that risks of further inflationary pressures are accumulating.

The RBI is mandated to maintain inflation near 4% and within a tolerance band of 2%-6%.

While comments from a majority of members signalled some room for rate cuts, external member Ram Singh differed.

“It seems the economy is entering a structural phase where a 7%-plus growth rate and moderate inflation can coexist,” Singh said, adding there could be room for easing at an “appropriate time”.

Member Nagesh Kumar also sees room for monetary policy to support growth but awaits new economic data and transmission of rate cuts.