RBI Rate Pause Pragmatic, But Policy Focus Must Shift to Capital Flows: Artha Bharat
by Prashant Kapadia/NHN
Sachin Sawrikar, Managing Partner, Artha Bharat Investment Managers IFSC LLPon today’s RBI MPC outcome.
The RBI’s decision to hold rates is pragmatic, but it also highlights a broader constraint: monetary policy is nearing the limits of what it can achieve on its own. With around 125 basis points of easing already in the system and liquidity conditions supportive, the incremental impact of further cuts is likely to be modest.
The ceasefire in West Asia is a clear near‑term positive, easing pressure on crude and inflation. But the bigger issue now is capital. In a volatile global environment with tighter liquidity, foreign investors are far more selective. India’s macro fundamentals remain strong, but they are no longer sufficient by themselves to guarantee sustained flows.
The next phase of policy therefore needs to move beyond rates. Improving FPI participation through tax clarity, regulatory simplicity, deeper market access, and faster execution will matter as much as headline growth. Monetary policy can stabilise the cycle, but it cannot by itself drive capital allocation.
If crude remains contained, the RBI will retain flexibility. But without reducing friction for global investors, India risks under‑capturing the capital flows its growth story should command.