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In its latest Monetary Policy Committee (MPC) meeting, Reserve Bank of India (RBI) Governor Sanjay Malhotra revealed the central bank’s economic outlook and key policy decisions for the upcoming fiscal year. Among the highlights were revised GDP growth projections and a policy repo rate cut aimed at supporting economic growth.
GDP Growth Projections for 2025
Governor Malhotra announced that the RBI expects real GDP growth to remain steady throughout 2025. According to the projections, the growth rate is estimated at:
- 6.7% in Q1 and Q2,
- 7% in Q3, and
- 6.5% in Q4.
These projections reflect the RBI’s optimistic view on the economic recovery and sustained momentum in growth despite global uncertainties.
Repo Rate Cut by 25 Basis Points
In a significant move, the RBI MPC decided to reduce the policy repo rate by 25 basis points (bps) to 6.25%. This marks a shift toward a more accommodative monetary policy stance, aiming to boost liquidity and promote economic activity.
The repo rate is the rate at which the central bank lends money to commercial banks. A cut in this rate typically leads to lower borrowing costs for businesses and individuals, encouraging investment and consumption.
Inflation Targeting a Key Focus
Governor Malhotra emphasized that inflation targeting has played a crucial role in maintaining economic stability in India. He pointed out that the Consumer Price Index (CPI) has largely remained within the prescribed range under the current inflation-targeting framework, with only a few instances where it breached the upper limit.
“Inflation targeting has served the Indian economy very well,” Malhotra said, reaffirming the RBI’s commitment to keeping inflation within the tolerance band while ensuring that growth is not compromised.
MPC Resolutions Impact All Citizens
Governor Malhotra also highlighted the broad impact of the MPC’s decisions, stating that they affect every citizen. “MPC resolutions are of relevance not just to businesses and economists but to all citizens of the country,” he noted.
The governor reiterated the importance of maintaining a balance between controlling inflation and fostering growth, especially as India navigates a complex global economic environment.
What This Means for the Economy
The repo rate cut is expected to provide relief to borrowers and stimulate demand in key sectors such as housing, automobiles, and consumer goods. Meanwhile, the steady GDP growth forecast signals resilience in the Indian economy despite external challenges like fluctuating global oil prices and geopolitical tensions.
