Lenders prepared, borrowers cautious.

"India's central bank held key interest rates steady yesterday as expected, saying the economy remains steady," as "The six-member rate-setting panel voted unanimously to hold the key repo rate at 5.50% and decided to continue with the 'neutral' policy stance." "The central bank has cut the policy repo rate by 100 bps (basis points) so far in 2025 as price pressures eased." Reuters. "India's annual retail inflation slowed to a more than six-year low of 2.10% in June near the lower range of the Central bank's tolerance band, as food prices continued to ease." However, "Core inflation, which excludes volatile items such as food and energy and is an indicator of domestic demand, was at 4.4%-4.5% in June from 4.17%-4.20% in the previous month." "India's statistical agency does not publish core inflation data." Reuters. The decision not to lower policy rate despite a slump in retail inflation could be partly because the US Federal Reserve decided to hold its Funds rate at 4.25%-4.5% in its meeting on 30 July. CNBC. Also, the Indian rupee has been falling against the US dollar, from Rs 84.220 to $1 on 5 May to close at Rs 87.783 to $1 yesterday. exchangerates. org.uk. Lowering interest rate is meant to make it easier for companies to borrow to increase capacity and hire more workers. "Although credit growth slowed in 2024-25, the broader flow of financial resources to the commercial sector has significantly improved, Reserve Bank of India (RBI) Governor Sanjay Malhotra said." "Credit growth tempered to 12.1% in FY25 from 16.3% in the financial year prior." Mint. Lowering rates may not have increased borrowing because the banks are flooded with cash anyway. On 11 July, the RBI conducted a variable rate reverse repo (VRRR) as it tried to suck Rs 2.5 trillion out of the banking system after having taken Rs 3 trillion out already. And yet, "By some estimates, the system is now awash with close to Rs 9 trillion in excess funds." TOI. "When it comes to large, long-gestation projects, a handful of tycoons will do the heavy lifting, and it will take more than cheaper borrowing costs to sway their decisions. The private sector's capacity-expansion intentions have fallen to a three-year low. Banks' exposure to industries that used to be some of their biggest borrowers...is down to 11% of their loan book, half of what it was a decade ago," wrote Andy Mukherjee. Falling private sector investments means fewer well-paying jobs. As a result, "In a high-stakes gamble for explosive returns, a vast army of retail investors has systematically shed its holdings in India's most formidable blue chip companies," "to chase the 'crorepati' (billionaire) dream in the volatile, high-octane world of small and mid-cap stocks." ET. People may be short of money but, "India's gross Goods and Services Tax (GST) for the month of July stood at Rs 1.96 trillion, marking a 7.5% increase compared to the same month last year." ET. Investments or not, jobs or not, income or not, the government tax collections keep on increasing. How else can they enjoy? RBI trying its best.