India Monetary Policy August 2019


India: Reserve Bank of India slashes interest rates in August

August 7, 2019

The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) cut all monetary policy rates by 0.35 percentage points at its 5–7 August meeting, reducing the repo rate to 5.40%, the marginal standing facility to 5.65% and the reverse repurchase rate to 5.15%. This decision was supported by four of the six MPC members; the other two members voted for a more conventional 0.25 percentage-point cut, which was what market analysts had expected. The MPC also voted to keep the official monetary policy as “accommodative”. The decision to cut rates again in August brings the total number of cuts this year to four, with an accumulated reduction in interest rates of 1.1 percentage points.

August’s decision was primarily influenced by still-weak economic activity, while the global economic slowdown and escalating trade tensions pose serious downside risks to the economy. In addition, increased dovishness from other major central banks in recent weeks likely gave the RBI more room to loosen monetary policy in August as it will have reduced downward pressure on the currency. The RBI reduced its GDP growth forecast for FY 2019, which runs to March 2020, to 6.9% from 7.0%. In terms of inflation, the RBI adjusted its forecast for H2 FY 2019 to 3.5–3.7%, from 3.4–3.7%.

Sonal Varma, chief India economist at Nomura, noted that while “growth is likely to weaken further in Q2, our leading indicators point to a slight uptick in Q3”. As a consequence of frontloading 1.1 percentage points of easing, the team at Nomura concludes that the RBI seems “poised to take stock of [the monetary policy] transmission to lending rates and eventually growth”. That said, Varma added that “a significant weakening of global growth and its domestic spillover skew the risks towards more easing”. This point was reinforced by Prakash Sakpal, India economist at ING, who noted that “the larger-than-expected rate cut today may well foreshadow continued policy easing and further currency weakness ahead.”

The next monetary policy meeting is scheduled for 2–4 September.

Our complete range of Consensus Forecast panelists are currently reviewing their forecasts. New Consensus Forecasts will be available from 20 August.

Author:, Economist

Sample Report

Looking for forecasts related to Monetary Policy in India? Download a sample report now.


India Monetary Policy Chart

India Monetary Policy Rates August 2019

Note: Marginal Standing Facility (MSF) Rate, Repo Rate and Reverse Repo Rate in %.
Source: Reserve Bank of India (RBI).

India Economic News

  • India: Industrial production contracts at the sharpest pace since February 2013 in September

    November 11, 2019

    Industrial production fell 4.3% in September compared to the same month a year earlier, down from August’s revised 1.4% decrease (previously reported: -1.1% year-on-year). Most industrial sectors contributed to the slump in September, with output in the mining sector dropping the most, followed by that of the manufacturing sector and electricity sector, respectively.

    Read more

  • India: Private sector falls further into contraction in October

    November 5, 2019

    The composite Purchasing Managers’ Index (PMI) produced by IHS Markit dipped to 49.6 in October from 49.8 in September, leaving it further below the 50-threshold that separates contraction from expansion in the private sector. The services PMI increased to 49.2 in October, up from 48.7 in September, although still below the all-important 50-mark.

    Read more

  • India: Exports and imports both decrease in September

    October 15, 2019

    Merchandise exports declined for the second consecutive month in September, dropping 6.6% compared to the same month a year earlier and amounting to USD 26.0 billion (August: -6.0% year-on-year).

    Read more

  • India: Consumer price inflation accelerates in September

    October 14, 2019

    In September, consumer prices rose 0.55% compared to the previous month, edging down from the 0.56% increase in August.

    Read more

  • India: Industrial production sinks in August

    October 11, 2019

    Industrial production fell 1.1% in year-on-year terms in August, contrasting July’s revised 4.6% increase (previously reported: +4.3% year-on-year). Most industrial sectors contributed to the slump in August, with output in the manufacturing sector dropping the most, followed by output in the electricity sector.

    Read more

More news

Search form