RBI Cuts Repo Rate Amid Economic Uncertainty
The Reserve Bank of India (RBI) has announced a 25 basis point reduction in the repo rate, bringing it down to 6.5%. This marks the second rate cut of the year and reflects a shift in the central bank’s policy stance from neutral to accommodative. RBI Governor Sanjay Malhotra highlighted the challenges posed by global economic uncertainties, particularly those stemming from trade tariffs, while also revising the GDP growth forecast for FY 2025-26 from 6.7% to 6.5%.
Repo Rate Cut and Policy Shift
On Wednesday, the RBI’s Monetary Policy Committee (MPC) decided to lower the repo rate by 25 basis points, a move aimed at stimulating economic growth. This decision indicates a significant change in the RBI’s approach, as the central bank has transitioned from a neutral stance to an accommodative one. Governor Malhotra explained that this new stance suggests the possibility of further rate cuts in upcoming reviews, depending on economic conditions.
Malhotra emphasized the importance of maintaining a supportive monetary policy to foster growth while remaining vigilant about inflation. The governor stated, “We have reduced repo rates. We have changed the stance going forward, which means that the direction of the policy repo rate is downwards.” He acknowledged the uncertainty surrounding the future trajectory of the repo rate, humorously noting, “I’m Sanjay, but I’m not the Sanjay of Mahabharata,” indicating that he cannot predict the future with certainty.
Economic Growth Projections Revised
In conjunction with the repo rate cut, the RBI has revised its GDP growth projections for the Indian economy. The new forecast for FY 2025-26 is set at 6.5%, down from the previous estimate of 6.7%. This adjustment reflects the RBI’s concerns regarding the impact of global economic factors, particularly the ongoing trade tariff disputes that have created additional uncertainties for economic growth and inflation.
Governor Malhotra pointed out that these trade-related measures have intensified the challenges facing the global economy. He stated, “The recent trade tariff related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation.” The RBI’s proactive measures aim to address these challenges and support domestic economic stability.
Collaborative Efforts for Economic Stability
During the announcement, Malhotra underscored the collaborative efforts required to navigate the current economic landscape. He acknowledged the government’s initiatives, including increased capital expenditure and tax rebates, as essential components of the broader strategy to stimulate growth. “It’s a joint effort,” he remarked, highlighting the need for cooperation between the central bank and the government in addressing economic challenges.
The RBI’s commitment to maintaining a non-inflationary growth trajectory remains a priority. Malhotra reiterated the importance of clear and consistent policies that align with the best interests of the economy. He stated, “We are aiming for a non-inflationary growth that is built on the foundations of an improved demand and supply response and sustained macroeconomic balance.” The central bank’s agility and decisiveness in policy-making will be crucial as it responds to evolving economic conditions.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
