RBI likely to hold repo rate steady in August MPC meet: HSBC report

The Reserve Bank of India is expected to maintain the status quo on repo rates in the August 6 MPC meet, as per HSBC Global Investment Research. The report projects 7 per cent GDP growth in upcoming quarters despite inflation and corporate margin pressures

New Delhi: The Reserve Bank of India (RBI) is projected to keep repo rates unchanged in the upcoming Monetary Policy Committee (MPC) meeting on August 6, a report said on Friday.

Amid global market uncertainties and tariff concerns, India’s GDP is projected to be 7 per cent in the upcoming three quarters, higher than current estimates, according to the report from HSBC Global Investment Research.

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Analysts believe that the GDP deflator has too much WPI inflation in it. “Such a scenario could push up real GDP growth to around 7 per cent in the June, September and December quarters of FY26, higher than our estimate of actual growth on the ground,” the report said.

Analysts said that the corporate results may improve in the long run.

“From a macroeconomic lens, the weakness in nominal GDP growth in June has also shown up in corporate results. By our forecast, this weakness in NGDP growth, triggered partly by falling prices, is likely to persist until the December quarter. The silver lining here is that over time, falling input prices do raise corporate margins,” the report noted.

Though the formal sector slowed after a great run, the informal sector strengthened, which has caused growth trend confusion. June’s data was lacklustre, adding to uncertainties. It remains to be seen if it was a one-time event caused by early rainfall or the start of a trend, the report said.

The improvement in informal sector incomes may lower the demand for consumption loans. Credit growth is being squeezed from both ends. RBI easing seemed to help partially. Reforms that raise formal sector fortunes may be the better solution.

On inflation, the research division said average inflation is projected to be 3 per cent in FY26 and 5 per cent in FY27, averaging 4 per cent. “Core inflation excluding gold is also in the 4 per cent ballpark, and hasn’t fallen much over the last year.” The underlying rate matched the RBI’s target of 4 per cent.