RBI's Next Move: Economists Weigh In Amid US Tariff Uncertainty

By Nikhil Dedha: With the imposition of a new 25% tariff by the United States, there is growing consensus among economists that the Reserve Bank of India (RBI) is poised to keep the benchmark interest rate steady at 5.5% during its upcoming Monetary Policy Committee (MPC) meeting, scheduled from August 5 to 7.

In an exclusive dialogue with ANI, top economists shared insights and expectations prior to the August 7 policy decision. Bank of Baroda Economist Dipanwita Mazumdar indicated that the RBI might adopt a 'wait and watch' strategy, given the existing significant frontloading. 'In a globally volatile policy landscape, a data-driven cautious approach is preferable over any hasty move,' she explained. Experts highlighted the US tariffs as a potential risk to India's economic growth. A 10% drop in Indian exports to the US could potentially impact GDP by approximately 0.2%, they noted.

Conversely, this could be an opportunity for India to deepen its integration into global supply chains, especially in South-East Asia, and boost export competitiveness in labor-centric sectors. Piramal Group's Chief Economist Debopam Chaudhuri suggested that while the RBI will likely retain the rate at 5.5%, a 25 basis point cut could occur in October. Meanwhile, banking expert Ajay Bagga expressed a divergent opinion, saying there is scope for a rate cut in the upcoming meeting. 'Monetary space exists for a 25 basis point rate reduction in August,' Bagga remarked. Despite varying viewpoints, the prevailing sentiment among economists supports maintaining the rate, with potential easing contingent on evolving global and domestic economic conditions.

(With inputs from agencies.)