The Hindu Editorial Analysis- 9th August 2025 | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly - UPSC PDF Download

Time for ActionWhy is it News?

• The Reserve Bank of India (RBI) made a wise decision by pausing rate cuts due to ongoing uncertainties.

Introduction

• The RBI's choice to halt further rate cuts shows a cautious approach in light of increasing global uncertainty.
• With unresolved tariff issues, ongoing trade discussions, and the recent impact of monetary easing not fully realized, the central bank has opted for strategic patience.
• This careful strategy emphasizes the need for complementary fiscal actions to bolster India's growth and stability.

RBI's Prudent Pause Amid Global Uncertainty

• On August 6, 2025, the RBI's Monetary Policy Committee decided to pause rate cuts after a total reduction of 100 basis points since February.
• Governor Sanjay Malhotra pointed out the ongoing uncertainty in global trade, especially regarding changing tariff situations.
• This decision was made just before the U.S. imposed an additional 25% tariff on Indian imports, escalating trade tensions.
• India is still in the process of negotiating a Bilateral Trade Agreement with the U.S., and final tariff levels are yet to be determined.
• Additional U.S. penalties on countries purchasing oil from Russia could also affect India's competitive position.

Strategic Flexibility for Future Decisions

• By maintaining steady rates, the RBI keeps the option open for future adjustments based on the evolving global and domestic situation.
• The central bank aims to observe the effects of previous rate cuts before considering further actions.
• This strategy reflects policy prudence, helping to avoid premature or ineffective measures.

Transmission of Rate Cuts Still in Progress

• The 100 basis points rate cut since February is still being transmitted through the financial system.
• The RBI noted that banks have ample liquidity, indicating sufficient funds for lending.
• However, the slow transmission of lower rates to consumers and businesses remains a concern.
• The pause allows time to evaluate whether cheaper credit is reaching borrowers and impacting real economic activity.

Weak Credit Demand Signals Deeper Issues

• Despite liquidity, credit demand is weak, particularly in key consumer sectors:
• Consumer durable loans declined by 3% year-on-year.
• Housing loan growth fell from 36% to 9.6%.
• Vehicle loans also slowed by 5 percentage points.
• Industrial credit growth dropped to 5.5% in June 2025, down from 8.1% a year earlier.
• These trends suggest that rate cuts alone are insufficient to stimulate demand or investment.

The Need for Coordinated Fiscal Action

• Governor Malhotra emphasized that monetary policy alone cannot ensure growth; structural and fiscal policies must complement it.
• The government needs to take decisive actions such as:
• Rationalising GST rates, a long-awaited reform.
• Reducing fuel prices in line with global oil rates to enhance consumer confidence.
• While the RBI can afford to wait, the government must proactively stimulate demand and support the economy.

Conclusion

• The RBI's careful wait-and-see approach highlights the need for coordinated efforts.
• Simply relying on monetary policy is not enough to revive the economy.
• Targeted fiscal measures, including tax reforms and fuel price adjustments, are crucial to boost demand.
• A unified policy response is essential to ensure sustainable growth amid a challenging global landscape.

Mending Ties

Why in News?

 Both India and the Philippines are increasingly willing to strengthen their bilateral relationship. 

Introduction

The recent state visit by President Ferdinand Marcos Jr. of the Philippines to India marked a significant turning point in the relationship between the two countries. During this visit, India and the Philippines elevated their ties to a Strategic Partnership. This development is set against the backdrop of rising tensions in the Indo-Pacific region and underscores India’s commitment to expanding defense cooperation, reinforcing its maritime position, and deepening diplomatic engagement with Southeast Asia.

Strategic and Defence Alignment Gains Prominence

• President Ferdinand Marcos Jr. of the Philippines recently concluded his inaugural state visit to India since taking office in 2022.
• This visit resulted in the signing of a Strategic Partnership Agreement with India, marking a significant shift towards stronger bilateral ties with a focus on hard power.
• President Marcos has taken a strong position against Chinese incursions in the West Philippine Sea, aligning closely with India’s stance on the Indo-Pacific.

Joint Naval Exercises

• For the first time, the Indian Navy and the Philippine Navy conducted joint maritime exercises in the South China Sea, symbolizing the growing alignment between India and the Philippines.
• These drills drew criticism from China, further highlighting the strengthening ties between the two nations.
• India reaffirmed its support for the 2016 UNCLOS Tribunal ruling, emphasizing its commitment to a rules-based Indo-Pacific.
• The Philippines expressed appreciation for India’s consistent diplomatic support on this issue.

Elevating Defence and Military Cooperation

The Philippines has now become India’s fifth Strategic Partner, joining the ranks of:

• Japan
• Vietnam
• Australia
• South Korea

Diplomatic Reset and ASEAN Ties

• The Philippines is set to chair ASEAN in 2026 and is currently the coordinator for the ASEAN-India strategic partnership.
• President Marcos’s invitation to India was viewed as a move to mend relations following tensions caused by remarks from Commerce Minister Piyush Goyal in June, where he referred to some ASEAN countries as the “B-team of China.”
• India is actively working to revise the ASEAN-India Trade in Goods Agreement (AITIGA) and has initiated discussions for a Preferential Trade Agreement (PTA) with the Philippines.

Trade and Connectivity: Still Evolving

While trade figures remain modest, there is a noticeable expansion in collaborations between the private sectors of both countries.

Larger Geopolitical Implications

• President Marcos’s visit to India signals a strong commitment from India to engage actively with Southeast Asia, extending its outreach beyond the Quad framework.
• The visit reflects India’s dedication to maintaining peace and security in the Indo-Pacific region and strengthening its multi-alignment strategies.
• It also emphasizes India’s intention to engage with regional players, not just major powers, in its diplomatic efforts.
• The growing alignment between New Delhi and Manila, as demonstrated during this visit, is a response to the increasing regional tensions and highlights the convergence of interests between the two nations.

Conclusion

 President Marcos’s visit to India underscored India’s commitment to a rules-based Indo-Pacific framework, extending its focus beyond the Quad alliance. The strengthening of military cooperation, the emergence of new trade links, and the efforts to reset ASEAN ties reflect India’s calibrated and firm approach to regional diplomacy. The Strategic Partnership with the Philippines is a timely indication of India’s expanding influence in a multipolar Asia.