Headline target guides policy as GDP growth estimated at 6.7 percent

Reserve Bank of India Governor Sanjay Malhotra clarified that policy decisions remain strictly guided by headline inflation rather than core measures.

While core inflation excluding precious metals currently ranges between 2.1 percent and 2.5 percent, officials expect it to converge toward 4 percent by the end of the financial year.

The central bank projects FY27 GDP growth at 6.7 percent, supported by a potential 7 percent expansion in the first quarter, with risks evenly balanced.

Monetary policy transmission on lending rates has moderated to approximately 80 basis points, which the central bank considers largely complete.

Officials reiterated that interest rate adjustments will remain data-dependent as growth and inflation dynamics evolve.

Foreign currency non-resident deposit inflows under the FCNR(B) scheme reached $36 billion to $40 billion, fortifying India's external position.

Governor Malhotra noted that the Indian rupee strengthened from 97 to around 95 levels per US dollar, reiterating that market forces determine exchange rates while interventions target excess volatility.

Liquidity surpluses are expected to peak in September before being absorbed by normal currency growth.

Additionally, pilot polymer bank notes are being prepared to increase lower-denomination currency durability by three to four times.