India rate panel says US tariffs key drag on growth, flags benign inflation outlook
The Reserve Bank of India held its key repo rate steady at 5.50% earlier this month, after cutting rates by 100 basis points so far in 2025.
The six-member Monetary Policy Committee voted unanimously to retain a 'neutral' stance, citing the need for flexibility amid domestic and global uncertainties.
'Growth projected at 6.5% is resilient,' RBI Governor Sanjay Malhotra wrote in the minutes, but added the projection was 'certainly lower than what we can achieve.'
He warned that uncertainty in external demand, driven by tariffs and geopolitical tensions, remained a major drag on growth.
India faces as much as 50% tariff on exports to the United States starting August 27 after U.S. President Donald Trump imposed an additional 25% tariff earlier in the month citing New Delhi's continued imports of Russian oil.
Malhotra said the moderation in food inflation since the June meeting was larger than expected, but cautioned that the uncertainties around tariffs were still evolving. He added that the neutral stance would provide the necessary flexibility to respond to changing conditions.
India panel proposes exempting taxes on health, life insurance
India's retail inflation rate dropped to its lowest level in eight years in July, as falling food prices, especially vegetables and pulses, squeezed farmers' incomes.
Deputy Governor Poonam Gupta said the moderation in inflation was not broad-based and was primarily driven by food prices falling. 'Core inflation is likely to remain above 4% in the near to medium term, barring any major negative shock to input prices,' she wrote.
MPC member Ram Singh said the average CPI inflation outlook for 2025–26 had become 'very benign,' though core inflation was expected to stay above the target range. He flagged sustained growth in construction, trade and services, but warned of high uncertainty on both inflation and growth fronts.
External member Nagesh Kumar said the case for stimulating private investments and urban demand remains strong while the benign inflation outlook also provides policy space. But considering trade policy uncertainties, it is better to wait and watch before looking at any policy decisions at the October meeting, he said.
External member Saugata Bhattacharya said monetary policy has to address multiple, often conflicting, objectives andoptimise the consequent trade-offs. He highlighted the trade-off between loan and deposit rates as one of the key considerations.
The central bank has a 4% inflation target, with a tolerance band between 2% and 6%. India reports GDP growth data on Friday.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
36 minutes ago
- Business Recorder
Trump hails ‘total victory' as US court quashes $464mn civil penalty
NEW YORK: A US court threw out Thursday a $464 million civil penalty against President Donald Trump imposed by a judge who found he fraudulently inflated his personal worth, calling the sum 'excessive' but upholding the judgment against him. Judge Arthur Engoron ruled against Trump in February 2024 at the height of his campaign to retake the White House, which coincided with several active criminal prosecutions that the Republican slammed as 'lawfare.' 'It was a Political Witch Hunt, in a business sense, the likes of which no one has ever seen before,' Trump said on his Truth Social platform Thursday, adding that 'everything I did was absolutely CORRECT and, even, PERFECT.' When Engoron originally ruled against Trump, he ordered the mogul-turned-politician to pay $464 million, including interest, while his sons Eric and Don Jr. were told to hand over more than $4 million each. The judge found that Trump and his company had unlawfully inflated his wealth and manipulated the value of properties to obtain favorable bank loans or insurance terms. Alongside the financial hit to Trump, the judge also banned him from running businesses for three years, which the president repeatedly referred to as a 'corporate death penalty.' On Thursday, five judges of the Appellate Division of the New York Supreme Court upheld the verdict, but ruled that the size of the fine was 'excessive' and that it 'violates the Eighth Amendment of the United States Constitution.' The Eighth Amendment prohibits excessive or cruel punishments and penalties. 'Massive win! State Attorney General Letitia James, who brought the initial case, could now appeal to the state's highest court, the New York Court of Appeals. Following the initial verdict, Trump subsequently sought to challenge the civil ruling as well as the scale and terms of the penalty, which has continued to accrue interest while he appeals. He repeatedly condemned the case and the penalty as politically motivated. His son Don Jr. termed the appellate court ruling a 'massive win!!!' 'New York Appeals Court has just THROWN OUT President Trump's $500+ Million civil fraud penalty! It was always a witch hunt, election interference, and a total miscarriage of justice… and even a left leaning NY appeals court agrees! NO MORE LAWFARE!' he wrote on X. During hearings, conducted without a jury under state law, Trump accused then-president Joe Biden of driving the case, calling it 'weaponization against a political opponent who's up a lot in the polls.' As the case was civil, not criminal, there was no threat of imprisonment. Trump's economic advisor Peter Navarro said at the White House Thursday that 'James is another one that belongs in jail,' referring to the New York attorney general. 'The Democrats really overplayed their hand on this because they thought they could take Donald Trump out,' he said.
Business Recorder
3 hours ago
- Business Recorder
Boeing in talks to sell up to 500 planes to China: Bloomberg
NEW YORK: US aviation giant Boeing is in talks to sell up to 500 aircraft to Chinese companies, Bloomberg News reported Thursday, citing sources familiar with the matter. The deal would be a major win for the struggling US manufacturer, with company shares rising as high as 3.7 percent in pre-market trades, but up less than one percent about 15 minutes into Tuesday's session. Bloomberg's sources said the deal would be contingent on Washington and Beijing coming to a longer-term agreement in their simmering trade war. The Boeing deal would likely be a key facet of a US-China trade deal, according to Bloomberg, whose sources said Chinese officials had begun surveying domestic airlines for how many planes they would need. BD orders 25 Boeing planes as part of push to ease US tariffs Since taking office in January, President Donald Trump has hit trading partners around the world with new tariffs, seeking to address US trade deficits that he says are evidence of unfair practices. Purchases of planes from Boeing, the largest US manufacturing exporter, often play a role in Trump's deals promising to offset trade imbalances. In July, the White House said that Japan had committed to buying 100 Boeing jets, and Indonesia 50 aircraft, as part of trade pacts negotiated to avoid steeper tariffs. Trump has taken particular aim at China in his attempt to remake international trade. Washington and Beijing have slapped tariffs on each other's products this year, with the escalation at one point rising to prohibitive triple-digit levels and snarling trade, including a temporary halt to deliveries of Boeing jets. Both sides, however, agreed in May to temporarily lower the duties, and have issued subsequent 90-day extensions as they negotiate a longer-term deal. China's last major Boeing deal came early in Trump's first term in office, during his state visit in November 2017, when Beijing agreed to purchase 300 single and twin-aisle planes for more than $37 billion. Boeing in July reported a smaller second-quarter loss than the previous year, while delivering its most planes since 2018. The manufacturer has been dogged by quality control-related issues after the near-catastrophic blowout of a fuselage panel on a 737 MAX in January 2024. That incident followed two deadly crashes of the popular MAX aircraft in 2018 and 2019.
Business Recorder
4 hours ago
- Business Recorder
India, Russia agree to boost trade ties after foreign ministers meet in Moscow
MOSCOW: India and Russia agreed to boost trade ties on Thursday as their foreign ministers met in Moscow, giving little indication that U.S. President Donald Trump's hefty tariffs on India for buying Russian oil would disrupt their relations. Indian goods face additional U.S. tariffs of up to 50%, among the highest imposed by Washington, due to New Delhi's increased purchases of Russian oil. Western countries boycotting Russian crude say India's purchases are helping to fund Moscow's war in Ukraine. But NewDelhi says its purchases are purely commercial transactions, and accuses the U.S. and European Union of double standards, noting that they continue significant trade with Moscow themselves. 'We have good results in cooperation in the hydrocarbon sector, in the supply of Russian oil to the Indian market. And we have a mutual interest in implementing joint projects for the extraction of energy resources, including in the Russian Federation - in the Far East and on the Arctic shelf,' Russian Foreign Minister Sergei Lavrov said at a joint news conference with Indian Foreign Minister Subrahmanyam Jaishankar. Jaishankar said that relations between the two countries had been among the steadiest of major nations in the world since World War Two, referring to a close friendship going back to the days of the Soviet Union. Russia has 'special mechanisms' to supply oil to India, embassy official says The two countries reaffirmed their ambition to expand bilateral trade, including by increasing India's exports to Russia, Jaishankar said, according to a statement from India's foreign ministry. 'This (trade expansion) requires swiftly addressing non-tariff barriers and regulatory impediments,' Jaishankar said. 'Enhancing Indian exports to Russia in sectors like pharmaceuticals, agriculture and textiles will certainly help to correct the current imbalance.' Russia was able to divert its exports of oil, a significant source of state revenue, away from Europe and mainly to China and India after the West imposed sanctions on Moscow over its conflict in Ukraine. India and China are the biggest buyers of Russia's oil. Russian embassy officials in New Delhi said on Wednesday that Russia expected to continue supplying oil to India despitepressure from the United States, adding that Moscow hoped trilateral talks with India and China would soon take place.
