Informist, Wednesday, Aug. 6, 2025

MUMBAI - Madan Sabnavis, chief economist, Bank of Baroda, said the following on the Reserve Bank of India's third bi-monthly monetary policy for 2025-26 (Apr-Mar) detailed on Wednesday:

The credit policy was more or less on the expected lines with a status quo on rates and a continuation of the stance being neutral. While underlining the strength of the economy, which is to grow by 6.5%, the policy has flagged the uncertainty on the trade front. But the overall outlook is sanguine. On inflation, the forecast has been brought down significantly to 3.1%. But it has been rightly emphasised that this is mainly due to the base effects and the fact that vegetable prices have come down.

Two issues have been reiterated through the discourse. The first is that inflation in Q4 will rise to 4.4% and stay elevated at 4.9% in the first quarter of FY27. This is because of the base effects weakening. The second is that core inflation which is what is really affected by policy remains elevated above 4%. Putting this together, it does look like that this status quo can be persevered with for some more time unless there is any dramatic change in the conditions outlined in the policy. There can, hence, be at most one more rate cut which will be data dependent. On the liquidity front, the governor has cleared the air by revealing that the present liquidity framework of targeting the WACR (weighted average call rate) will continue as it is appropriate. This provides certainty to the market. End

Compiled by Janwee Prajapati
Filed by Subhojit Sarkar

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