India holds rates as expected but flags growth risks from US tariffs
The six-member rate-setting panel held the policy rate in a unanimous vote and decided to continue with a 'neutral' stance.
Global trade challenges continue to linger but prospects for the Indian economy remain "bright", Governor Sanjay Malhotra said in his statement.
While headline inflation is much lower than expected, it is largely due to volatile food prices, Malhotra said.
A large majority of economists, 44 of 57, had forecast a pause in a July 18–24 Reuters poll, following a surprise 50 basis point cut in June.
The central bank has cut the policy repo rate by 100 bps so far in 2025 as price pressures eased, but U.S. President Donald Trump is ramping up threats to raise tariffs on imports from India over its Russian oil purchases.
The central bank left its economic growth forecast unchanged at 6.5%, though Malhotra acknowledged that prospects for external demand remained cloudy amid tariff uncertainties.
The surprise U.S. imposition of a 25% tariff on imports from India from August 1 could shave off up to 40 basis points from that level, while stunting business investment, economists have said. Just weeks ago, Indian officials had hoped to strike a deal that would cap tariffs at 15%.
Inflation slowed to a six-year low of 2.10% in June and is expected to fall to record lows when July data is released next week, before picking up again later in the year.
The inflation outlook has become "more benign", Malhotra said, cutting the central bank's inflation forecast for the current financial year to 3.1% from 3.7% earlier.
India's benchmark 10-year bond yield rose 4 bps to 6.3701%, while the rupee was little changed at 87.7350. The benchmark equity indexes were down around 0.2% each
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