Low Inflation and the RBI's Dilemma: The Case for a Rate Cut and Better Forecasting
UPSC Relevance
Prelims: Indian Economy (Inflation - Consumer Price Index (CPI); Monetary Policy - Reserve Bank of India (RBI), Monetary Policy Committee (MPC), Repo Rate, Inflation Targeting).
Mains:
General Studies Paper 3 (Economy): Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Inflation; Government Budgeting. The relationship between inflation and the RBI's monetary policy is a core GS3 topic.
Key Highlights from the News
India's Retail inflation in September 2025 reached a 99-month low of 1.54%.
This continuous low inflation indicates supply is outstripping demand in the market and slow economic activity.
Author's main arguments:
In this situation, to stimulate economic growth, the RBI should implement a significant interest rate cut at the next Monetary Policy Committee - MPC meeting.
The RBI's inflation forecasts being consistently wrong shows a serious flaw in their assessment process.
Despite government tax breaks, people are not spending much. This indicates weak domestic consumption.
The article states that measures like interest rate cuts are essential to increase private investment.
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