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Economic Review August 20254www.projectstoday.com RBI MONETARY POLICY: AUGUST 2025RBI%u2019s Monetary Policy Committee (MPC), in the meeting held from August 4 to 6, 2025, decided to maintain the policy repo rate at 5.50 percent. Accordingly, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) remains unchanged at 5.25 percent, while the marginal standing facility (MSF) rate and the Bank Rate are retained at 5.75 percent. According to the Committee, the decision aligns with achieving the medium-term consumer price index (CPI) inflation target of 4 per cent within a tolerance band of %u00b12 per cent, while fostering economic growth.Commenting on the global economic conditions, the Committee stated that the environment remains challenging. Although financial market volatility and geopolitical risks have moderated in recent months, uncertainties surrounding international trade negotiations persist. While the International Monetary Fund (IMF) has revised global growth projections upwards, overall momentum remains subdued. The disinflationary trend is losing pace, with some advanced economies witnessing a resurgence in inflationary pressures.On the domestic front, economic growth continues to display resilience, broadly in line with earlier assessments. Private consumption, supported by a recovery in rural demand, and fixed capital formation, driven by strong public sector capital expenditure, are sustaining economic momentum. On the supply side, a favourable south-west monsoon is aiding kharif sowing, replenishing reservoir levels, and strengthening agricultural activity. Additionally, services and construction sectors remain robust. However, the industrial sector continues to show subdued and uneven growth, primarily affected by lower output in electricity and mining.As per the Committee, the outlook for domestic growth remains positive, supported by a normal monsoon, declining inflation, improving capacity utilisation, and accommodative financial conditions. Continued support from monetary, regulatory, and fiscal policies, including strong public capital spending, is expected to further bolster demand.The services sector is projected to sustain its momentum, with continued expansion in construction and trade. Nonetheless, external demand prospects remain uncertain due to persistent tariff-related developments and ongoing trade negotiations. Moreover, prolonged geopolitical tensions, lingering global uncertainties, and volatility in international financial markets present downside risks to the growth trajectory.Considering all these factors, the projection for real GDP growth for 2025%u201326 is maintained at 6.5 percent, with quarterly estimates as follows: Q1 at 6.5 percent, Q2 at 6.7 percent, Q3 at 6.6 percent, and Q4 at 6.3 percent. Real GDP growth for Q1 of 2026%u201327 is projected at 6.6 percent. IIPIndia%u2019s industrial output witnessed a ten-month low in June 2025, with the Index of Industrial Production (IIP) declining to 1.5 percent compared to the same month last year, according to data released by the Ministry of Statistics and Programme Implementation. This marks a deceleration from the 1.20 percent growth seen in June 2025. The Manufacturing sector was the only main sector, registering an increase of 3.8 percent. The overall IIP for June 2025 stood at 153.3, higher than 151.0 in June 2024. Among the major sectors, Manufacturing grew by 3.9 percent, Mining contracted by 8.7 percent, and Electricity