RBI's rate cut, albeit late, to benefit econ, says fin min source
This story was originally published at 17:17 IST on 7 February 2025
Register to read our real-time news.Informist, Friday, Feb. 7, 2025
By Krity Ambey and Sagar Sen
NEW DELHI – The Reserve Bank of India's decision to cut the repo rate after a gap of nearly five years is likely to benefit the Indian economy, though the action is slightly delayed, according to a finance ministry official. The RBI should have cut the policy rate in August itself, the official said.
"We would have already been reaping the benefits of a rate cut by now if they had taken the action in August," the official said on the condition of anonymity. The RBI's Monetary Policy Committee Friday unanimously voted to cut the policy repo rate by 25 bps to 6.25%. The rate-setting panel had left the repo rate unchanged at 6.50% in the August meeting even as two members had voted in favour of lowering the repo rate by 25 bps at the time.
The committee also unanimously voted to retain the 'neutral' policy stance, after changing it in October from 'withdrawal of accommodation'. The MPC's decision to lower the repo comes after economic growth slowed down to a seven-quarter low of 5.4% in Jul-Sept. India's GDP growth in 2024-25 (Apr-Mar) is projected to slow down to a four-year low of 6.4%.
The MPC's rate cut follows the Budget, which last week announced sweeping tax breaks to the tune of INR 1 trillion for the country's middle class to revive consumption demand in the economy. End
Edited by Saji George Titus
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