Feb 7, Friday 2025: In a significant move to stimulate India’s slowing economy, the Central Bank of India, RBI, has announced a 25 basis points (bps) reduction in the Repo rate, bringing it down to 6.25%. This decision, unveiled on February 7, 2025, marks the first rate cut in almost 5 years and is the inaugural policy change under the leadership of Governor Sanjay Malhotra.
The Monetary Policy Committee (MPC), which comprises three RBI officials and three external members, unanimously voted for the rate reduction.
The committee has acknowledged that while economic growth is recovering. They acknowledged that while economic growth is on a recovery trajectory, it remains subdued compared to the previous year. The inflation dynamics provide the necessary space for monetary easing. The prevailing inflation dynamics have provided the necessary space for monetary easing.
India’s government has projected an annual growth rate of 6.4% for the financial year ending in March, a decline attributed to a sluggish manufacturing sector and slower corporate investments. Looking ahead, growth is anticipated to be in the range of 6.3% to 6.8% for the next fiscal year, with the central bank forecasting a more optimistic 6.7%.
Factors such as improving employment conditions, recent tax cuts, moderating inflation, and robust agricultural output following a strong monsoon are expected to elevate this growth.
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