Economists Highlight the Implications of RBI’s Quantum of Rate Cuts
“Stimulating Growth Through Policy Levers: RBI’s Decision”
Sanjay Malhotra, the Governor of the RBI, emphasizes the importance of boosting domestic private consumption and investment to propel economic growth. In response to shifting growth-inflation dynamics, the RBI MPC, led by Governor Sanjay Malhotra, has decided to reduce the benchmark repo rate by 50 basis points to 5.50%.
Leading economists and bankers believe that the decrease in inflation levels signals a conducive environment for stimulating growth. The recent 50 basis point cut, following two consecutive 25 basis point cuts, sends a significant message of support for economic expansion.
With inflation below the target of 4% and favorable prospects in the agriculture sector, concerns over price stability have diminished. Expectations of a decline in oil and commodity prices, as well as the possibility of increased trade with China due to export limitations to the US, further allay inflation worries.
Despite global uncertainties impacting trade and geopolitical tensions, the RBI projects real GDP growth for 2025-26 at 6.5%, with detailed quarterly estimates. The inflation forecast has been revised downwards to 3.7% from the previous 4%, reflecting the ongoing efforts to balance growth and stability.
Economists stress the need to consider the long-term effects of RBI policies, which typically manifest within 12 to 18 months. As industry and consumers respond to these changes, the focus remains on maximizing potential and adapting to evolving global conditions.
