The RBI’s Monetary Policy Committee (MPC) cut the repo rate from 6.50% to 6.25%, marking a significant shift after nearly five years.
With inflation moderating to 5.2% and GDP growth projections slipping to 6.4%, the MPC prioritized economic expansion over inflation control.
RBI Governor Sanjay Malhotra highlighted global uncertainties, including stalled disinflation, a stronger dollar, and challenges to emerging markets like India.
Inflation is expected to ease further to 4.2% in 2025-26, assuming favorable food inflation, a normal monsoon, and a good harvest of key vegetables.
The MPC expressed concerns over weak economic growth, particularly after a slump in Q2 and limited recovery signals.
The RBI’s policy stance seems to align more with the government’s fiscal measures, suggesting a joint effort to boost growth.
If the MPC had met later, it could have considered further cooling of inflation, which might have strengthened the case for the rate cut.
With a new RBI Governor and upcoming Deputy Governor appointment, the RBI may adjust its meeting schedule to better respond to real-time economic data.
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