The Reserve Bank of India (RBI) is facing a pressing priority to support economic growth, with domestic demand and the global trade environment signaling the need for intervention. While the RBI has responded well to economic challenges with timely rate moves, it is time to re-examine its developmental mandate and consider broader, structural policy options to shape India’s long-term economic trajectory. The country’s growth projections of 6-6.5% for the near term are not sufficient to achieve its ambition of becoming a developed economy by 2047, which requires sustained annual real GDP growth of 7-8% over the next two decades.
Sectoral trends indicate an uneven growth pattern, with agriculture and MSMEs performing reasonably well, while large industries are experiencing slow growth. Bank credit growth data also supports this cautious outlook, with large industries recording lower credit growth than overall credit increase. The RBI Governor has noted that large corporates are increasingly tapping alternative funding avenues, which partly explains slower bank credit uptake.
International headwinds, including recent tariff hikes by the US, are also likely to pull down growth. In this context, it is an opportune time for the RBI to revisit structural monetary policy tools that go beyond conventional repo rate changes. The People’s Bank of China (PBoC) has implemented instruments aimed at supporting targeted sectors, recognizing the heterogeneity of economic needs. India has experimented with similar tools, such as Targeted Long-Term Repo Operations (TLTROs), and the RBI could expand its monetary policy toolkit to support sectoral resilience.
The RBI needs to consider proactive, medium to long-term monetary policy interventions to support growth. This could include instruments like Pledged Supplementary Lending for infrastructure lending by institutions. With global uncertainties mounting and domestic demand showing signs of fatigue, the RBI must examine its policy options to support India’s economic trajectory. The country’s ambition of becoming a developed economy by 2047 requires sustained growth, and the RBI has a critical role to play in achieving this goal.
The World Bank’s 2025 Country Economic Memorandum highlights the need for India to sustain annual real GDP growth of around 7-8% over the next two decades to achieve high-income status. The RBI must work towards supporting this growth trajectory by using a range of monetary policy tools, including those that target specific sectors and industries. By doing so, the RBI can help shape India’s long-term economic trajectory and support the country’s development goals.