By Monetary Policy Changes by RBI
India’s Monetary Policy Committee (MPC) has recently cut the repo rate by 25 basis points to 6%, signaling a shift towards a more growth-supportive stance. The accommodative policy aims to boost economic growth while managing inflation. This change follows a period of disinflation, allowing the Reserve Bank of India (RBI) more flexibility to foster recovery.
Inflation Outlook and Economic Impact
Inflation in India has dropped to 3.34%, its lowest level in over five years, largely due to falling food prices. This decline provides space for the RBI to continue easing policies to further stimulate domestic demand and support economic recovery. RBI Governor Sanjay Malhotra emphasized the importance of nurturing demand in a period of moderate growth, helping increase economic momentum.
Updated GDP Growth Forecast for 2025
The RBI has revised its GDP growth estimate for the fiscal year down to 6.5%, slightly lower than the earlier forecast of 6.7%. This adjustment reflects the ongoing global uncertainty, particularly the impact of the U.S.-China trade tensions. These external factors are expected to slow down global growth and affect India’s economic performance.
Flexible Inflation Targeting Approach
The RBI has made significant progress in reducing inflation, creating room for more accommodative policies. RBI Executive Director Rajiv Ranjan noted that this flexibility in monetary policy is a reflection of flexible inflation targeting—balancing both inflation control and growth stimulation.
Conclusion: A Balanced Strategy for Growth
India’s Monetary Policy Committee is focused on ensuring the economy’s growth while keeping inflation within the target range. Despite external risks, the RBI aims to provide stable and supportive economic conditions for India’s continued recovery.
