RBI Policy Preview: Data Dependent

Research evidence excerpt

RBI Policy Preview: Data Dependent

IdeaM

Details

What are the drivers behind status quo in the August RBI

policy?

Growth - Remains Resilient

Incoming high-frequency indicators continue to point to resilient domestic activity,

suggesting robust underlying demand conditions and limited impact of supply-side

disruptions.

Consumption indicators remain healthy, with vehicle registrations (a proxy for retail sales)

sustaining double-digit growth since Oct-25 across both passenger vehicles and two

wheelers, averaging 22.6%YoY and 21%YoY, respectively. For Jun-26, FADA noted that

2026 recorded the strongest June sales on record across vehicle categories, while dealer

sentiment remains upbeat with around two-thirds expecting sales growth over the next

three months. Overall FMCG demand conditions are expected to remain stable, across

both rural and urban demand, while volume growth also continues to largely hold up.

Credit growth remains healthy at 17.7%YoY as of Jul-26, driven by broad-based strength

across both industry credit and retail sector lending. While part of the recent strength

reflects higher working capital requirements amid elevated input costs and favourable

base effects, we expect credit growth to gradually normalize towards 14-15%, broadly in

line with its underlying 2Y CAGR trend.

Industrial activity has also strengthened, with IIP growth accelerating to 7.3% YoY in June,

the highest since Jul-24, from 5% in May, highlighting continued resilience in domestic

production and capex-led momentum.

Meanwhile, the external backdrop has improved modestly, with early signs of recovery in

non-oil exports (12.7%YoY in QE Jun-26), pointing to a broadening of the growth impulse.

Taken together, resilient domestic demand and improving external conditions should