India better placed to manage retail inflation, MPC must maintain status quo on rates in June policy: Assocham

Stressing that India is better placed to manage retail inflation among the top ten economies, industry body Assocham today suggested that the Reserve Bank of India should maintain the status quo in the repo rate in June, while taking up liquidity measures.

“India is better placed to manage retail inflation among the top 10 economies, according to an analysis by the industry body ASSOCHAM during the turbulent period triggered by the war in West Asia,” Assocham said in its Global Research report.

It suggested that RBI should maintain the repo rate status quo while introducing liquidity, interest subvention, and moratorium support measures for export-oriented and energy-intensive MSMEs in the forthcoming review of monetary policy in the first week of June 2026. 

“India’s inflation stood at 3.2% in February 2026 and rose to 3.5% in April 2026, a 0.3 percentage-point increase. This performance is better than the significant increase in the US, where inflation rose from 2.4% in February 2026 to 3.8% in April 2026, a 1.4 percentage-point increase,” it said.

“As India’s headline inflation still prevails in the benign conditions, we suggest RBI to maintain a status quo on repo rate in the forthcoming review of RBI monetary policy in the 1st week of June 2026,” said Mr Nirmal K Minda, President, ASSOCHAM 

“Though some increase in headline inflation can’t be ruled out, given the recent rise in energy prices, it will be a transitory phase in the inflation trajectory, and we are hopeful that inflation will return to benign territory. At this juncture, any increase in the repo rate will have a significant impact on business sentiment and the country's demand trajectory,” Minda added. 

“We appreciate the Central Bank’s decision to conduct a ₹5 billion USD/INR buy-sell swap auction on 26 May 2026 to inject long-term liquidity into the banking system and strengthen forex reserves,” Minda added. This will help manage liquidity conditions and stabilise rupee volatility amid global pressures and recent currency depreciation driven by geopolitical tensions and oil price shocks, he said.

What more measures are needed?

Assocham has also proposed On-Tap long term repo operation (LTRO) scheme to provide ₹1 lakh crore in liquidity support at the Repo Rate to banks and NBFCs for lending to export-oriented and energy-related MSMEs. “It will primarily support working capital loans of up to ₹10 crore, thereby ensuring easier access to credit and business continuity,” the industry body said.

Assocham has also proposed an interest subvention to reduce borrowing costs for MSMEs reliant on exports to the MENA and EU regions. “Under the scheme, eligible units should be provided a 2% interest subsidy on working capital loans of up to Rs 5 crore.  Additionally, RBI may consider a six-month loan moratorium or interest support for energy-intensive MSMEs, helping businesses manage rising costs and maintain financial stability,” Assocham said.