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Supporting RBI's cautious interest-rate stance amid slowing growth

Published July 25, 2026 at 10:32 AM UTC

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The latest PMI data showing India's private sector at a four-year low actually reinforces the need for the Reserve Bank of India’s cautious approach to interest rates. Proponents of the RBI's policy argue that premature rate cuts could undo the progress made in taming inflation, which would hurt the economy more in the long run. Retail inflation, though moderating, remains above the central bank’s comfort level in several categories like food and fuel. By keeping rates steady, the RBI has anchored inflation expectations, allowing businesses to plan with more certainty. The slowdown in the PMI, while notable, is not severe enough to warrant an emergency rate cut—especially when the overall economy is still growing above 7%. Supporters also point out that global central banks, including the US Federal Reserve, remain hawkish. Cutting rates ahead of them could weaken the rupee and spur capital outflows. For households, stable prices are a bigger immediate concern than marginal drops in economic momentum. The RBI’s steady hand, they contend, has prevented the economy from overheating and will foster sustainable growth once global conditions improve. The slowdown is cyclical, not structural, and policy should not overreact to one month of data.