The MPC minutes show that three key factors were behind the pause in August – the uncertainty over trade tensions, the willingness to wait for the monetary policy transmission of existing easing, and concerns about base effect-induced rise in inflation above the RBI’s 4% target in H1 2026.
External member Professor Nagesh Kumar estimated that the tariffs could hit India’s GDP growth rate by 0.2-0.3 pp, hoping that the penal tariffs did not kick in, and the baseline tariffs would be brought down to levels enjoyed by other Asian countries.
RBI members, Rajiv Ranjan and Deputy Governor Poonam Gupta highlighted that the Indian economy has been resilient so far despite the trade related uncertainties, suggesting that their base case is still that growth will remain unscathed by the trade tensions.
The brokerage added that the MPC’s ‘wait and watch’ view will likely be satisfied by the October meeting, with much more clarity on Trump’s tariffs and the monetary policy transmission of existing easing largely over.
