Good News! RBI MPC Lowers Repo Rate by 25 bps; Governor Sanjay Malhotra Announces India’s GDP Growth Projection

RBI MPC: The RBI has announced a great relief in nearly five years as it reduced the repo rate by 25 basis points to 6.25%. RBI Governor Sanjay Malhotra stated that the decision was made to support economic growth despite inflation concerns. A survey by SBI economists had earlier hinted at a possible rate cut. Lower borrowing costs are expected to encourage spending and investment. This move comes shortly after the government introduced personal tax cuts in the union budget 2025 to boost consumption and economic activity.

India’s GDP Growth Forecast at 6.7% for FY26

RBI Governor Sanjay Malhotra has projected India’s GDP growth at 6.7% for the financial year 2025-26 in RBI MPC. However, earlier reports suggest that the economy will grow at a slower rate of 6.4% this year, a sharp decline from the 8.2% expansion recorded in fiscal 2024.

RBI cuts repo rate by 25 bps to 6.25% in first policy review under Governor Sanjay Malhotra

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The RBI MPC believes that easing monetary policy will provide much-needed support to growth. The government has set a fiscal deficit target of 4.8% for the current year, with plans to reduce it to 4.4% in 2025-26. These fiscal measures, combined with the repo rate cut, aim to maintain stability amid economic uncertainties.

Inflation and Weakening Rupee Remain Concerns

Inflation remains a key challenge for policymakers. While core inflation is below 4%, headline inflation is still above the RBI’s target. The falling rupee adds more pressure, making it essential for the central bank to balance economic growth and price stability through careful policy decisions.

Experts believe that while the repo rate cut provides relief, the RBI MPC must carefully track inflation trends. Governor Sanjay Malhotra stressed that the central bank’s future decisions will depend on how economic conditions evolve in the coming months.