A Proactive Shift in Policy to Safeguard Economic Momentum
In a carefully timed and forward-looking move, the Reserve Bank of India (RBI) has delivered a 25 basis points reduction in the repo rate, bringing it down from 6.25% to 6%, and shifted its monetary policy stance from “neutral” to “accommodative.” Amidst ongoing global trade tensions, a slowing US dollar, and emerging geopolitical risks, the decision reflects the RBI’s intent to support domestic economic growth, while staying vigilant to external challenges.
The Monetary Policy Committee (MPC) meeting outcomes reinforce the central bank’s approach of measured optimism and macroeconomic stability, providing reassurance to borrowers, investors, and financial markets.
- Repo Rate Slashed to 6%
The headline announcement from the RBI was the 25-bps cut in the repo rate, taking it to 6%. Accordingly, the Standing Deposit Facility (SDF) rate now stands at 5.75%, and both the Marginal Standing Facility (MSF) rate and the Bank Rate are adjusted to 6.25%.
This cut is expected to lower borrowing costs for both home and personal loans, potentially stimulating consumption and private investment.
- Policy Stance Turns ‘Accommodative’
The RBI’s pivot to an accommodative stance signals a willingness to ease monetary policy further if required, essentially ruling out any near-term rate hikes. This also aligns with its focus on growth revival, even as it monitors global macroeconomic volatility.
YES, Bank Chief Economist Indranil Pan remarked, “The RBI has delivered what the market expected – a 25-bps cut and a change in stance to accommodative… a rate hike is off the table for now.”
- GDP Growth Outlook Encouraging but Cautious
The RBI has retained its GDP growth forecast at 6.5% for FY2025-26, projecting steady quarterly momentum:
- Q1: 6.5%
- Q2: 6.7%
- Q3: 6.6%
- Q4: 6.3%
While this indicates a robust outlook, the central bank acknowledged that global economic risks, such as uncertainties in US trade policy and financial market volatility, could impact domestic momentum.
- Inflation in Control
The Consumer Price Index (CPI) inflation is projected at 4% for FY2025-26, assuming normal monsoon patterns. Quarterly inflation projections are:
- Q1: 3.6%
- Q2: 3.9%
- Q3: 3.8%
- Q4: 4.4%
With inflation well within target, the rate cut is seen as a strategic move to support growth without compromising price stability.
- Lending a Boost to Real Estate and Consumer Sentiment
The reduction in borrowing costs is a welcome signal for the housing sector.
Piyush Bothra, Co-founder & CFO of Square Yards, noted, “As inflation remains under control, this rate cut could serve as a stabilising force amid broader global uncertainties, reinforcing stakeholder confidence in residential real estate.”
- India’s Economic Fundamentals Remain Resilient
The RBI remains confident in India’s domestic growth drivers. A strong monsoon, improving manufacturing output, and resilient services are expected to drive economic activity. The central bank also pointed to healthy rural demand and increased infrastructure investment as key enablers of sustained growth.
A Forward-Thinking Move with Positive Ripple Effects
The RBI’s decision reflects a well-calibrated balance between prudence and growth ambition. The repo rate cut, along with an accommodative stance, positions India’s monetary policy to proactively support economic expansion, while maintaining inflation within target. With better credit availability, renewed investment enthusiasm, and rising consumer confidence, the RBI’s move sets the stage for a positive economic trajectory in the coming quarters.
(With inputs from agencies)
