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RBI Says Natural Real Rate Too Fluid to Guide Monetary Policy
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Moneycontrol•07-10-2026, 16:25
RBI Says Natural Real Rate Too Fluid to Guide Monetary Policy
- •RBI Deputy Governor Poonam Gupta stated that the natural real rate of interest is a highly theoretical and fluid concept that cannot reliably guide monetary policy.
- •Governor Sanjay Malhotra noted that there is no fixed estimate for India's potential growth rate and that real rate measurements remain dynamic and evolving.
- •India's resilient economic growth and relatively low, stable inflation in recent years indicate that the economy's underlying potential growth has strengthened.
- •Real GDP growth remained robust at 7.8 percent in the April-June quarter of FY27, while headline CPI inflation stood at 4.82 percent in August.
- •RBI officials emphasized that domestic conditions such as savings, investment, and fiscal prudence remain the primary considerations for setting interest rates, insulating India from global capital costs.
Key Questions Answered
RBI Deputy Governor Poonam Gupta stated that the natural real rate of interest is a highly theoretical and fluid concept that is difficult to pin down and measure dynamically, making it unsuitable to directly guide monetary policy decisions.
According to the latest estimates from the Ministry of Statistics and Programme Implementation, India's real GDP growth remained strong at 7.8 percent in the April-June quarter of FY27.
RBI officials noted that India's economic growth has been highly resilient to multiple global shocks while coexisting with low and stable inflation, which indicates that the country's underlying potential growth rate has strengthened.
