In a move aimed at supporting economic growth, the Reserve Bank of India (RBI) has cut the repo rate by 25 basis points, bringing it down to 6% from 6.25%. Along with this, the RBI shifted its policy stance from ‘neutral’ to ‘accommodative,’ signaling its commitment to bolster India’s economy as global economic uncertainties persist. This rate reduction comes at a time when India’s Consumer Price Index (CPI) inflation has dipped to 3.61%, comfortably within the RBI’s target of 4%, allowing the central bank to ease its monetary policy.
The RBI’s decision follows a downward revision of inflation forecasts for the fiscal year 2025-26, which is now projected at 4%. Additionally, the GDP growth estimate has been adjusted to 6.5%, down from the previous forecast of 6.7%. These revisions reflect a cautious outlook, considering the ongoing global challenges that India faces, including external shocks like global trade disruptions and U.S. tariff actions.
Financial experts have welcomed the RBI’s move, suggesting it will benefit both the financial system and economic growth. Umeshkumar Mehta, CIO of SAMCO Mutual Fund, emphasized that the rate cut aligns with expectations and should boost credit growth while stabilizing bond markets. However, he pointed out that the ongoing pressure on U.S. bond yields could limit the full impact of this policy in India.
Ajit Mishra, SVP of Research at Religare Broking, highlighted the significance of the shift in policy stance, noting that it signals the RBI’s readiness to cut rates further if necessary. He explained that enhancing liquidity and reducing interest rates would help counterbalance global economic challenges and support sustainable domestic growth.
This decision to ease monetary policy shows the RBI’s focus on domestic growth and inflation control. While the current rate cut may not be the last, it reflects the central bank’s strategy to create a favorable environment for India’s economic recovery amidst global uncertainties.
