MPC minutes: 100 bps rate cuts provide certainty in uncertain times, support growth, says RBI Governor

RBI MPC Minutes

The Reserve Bank of India’s cumulative 100 basis points (bps) reduction in the repo rate and a 100 bps cut in the Cash Reserve Ratio (CRR) since February will offer stability in volatile global conditions and aid India’s growth momentum in the near term, said Governor Sanjay Malhotra.

“This package of measures will provide some certainty in the times of uncertainty and is expected to support growth,” Malhotra said, according to the minutes of the Monetary Policy Committee’s (MPC) June meeting, published on June 20.

The June meeting saw the RBI cut the repo rate by 50 bps to 5.5 percent, marking the second back-to-back cut since February.

Inflation has cooled faster than expected, with the April consumer price index (CPI) print falling to a near six-year low of 3.2 percent, allowing the central bank space to act.

While headline inflation is expected to undershoot the RBI’s 4 percent target and average 3.7 percent in FY26, growth remains below the aspirational levels.

“While growth remains steady, it is lower than our aspirations,” Malhotra said. India’s GDP grew 6.5 percent in FY25, with a strong 7.4 percent showing in the March quarter.

In his statement, Malhotra noted that although rural demand is expected to get a boost from an above-normal monsoon and urban consumption from easing prices, investment activity remains concentrated in the public sector.

“Private sector investments have been weak despite high capacity utilisation and improved corporate balance sheets,” he added, pointing to global uncertainty as a deterrent.

He said the front-loaded rate action, along with clarity on liquidity conditions, “would send a clear signal to the economic agents”, thereby encouraging borrowing and spurring both consumption and investment.

Notably, the MPC also shifted its stance from ‘accommodative’ to ‘neutral’, signalling a more data-dependent approach going forward.