Crisil Economy First Cut: Resounding pause

MPC stands pat on rates, eases norms for capital inflows

• The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) kept policy rates unchanged at its June meeting. The repo rate stands at 5.25%, standing deposit facility rate at 5.00% and the marginal standing facility rate at 5.50%
• The MPC maintained its neutral stance, keeping its data-dependent approach for monetary policy actions
• The committee sees higher inflation risks compared with the previous policy. It raised its projection for consumer price index (CPI) inflation by 50 basis points (bps) to 5.1% in fiscal 2027
• The MPC also expects weaker economic growth, and reduced its projection for gross domestic product (GDP) growth by 30 bps to 6.6% for fiscal 2027
• The RBI also announced several regulatory-easing measures to attract foreign capital inflows – the key pain point for the rupee over the past year. The measures are aimed at attracting capital through several channels – from the bond market to external commercial borrowings (ECBs), and foreign currency non-resident bank (FCNR (B)) deposits