In a bid to 'boost economy', the Reserve Bank of India (RBI) has decided to cut the repo rate by 6.25% with immediate effect. 

The Monetary Policy Committee (MPC) held its 53rd meeting from February 5 to 7, 2025 under the chairmanship of Sanjay Malhotra, Governor, Reserve Bank of India.

The MPC members Dr Nagesh Kumar, Shri Saugata Bhattacharya, Prof Ram Singh, Dr Rajiv Ranjan, and Shri M Rajeshwar Rao attended the meeting.

After assessing the current and evolving macroeconomic situation, the MPC unanimously decided to, "reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.25% with immediate effect."

"The standing deposit facility (SDF) rate shall stand adjusted to 6% and the marginal standing facility (MSF) rate and the Bank Rate to 6.50%," according to RBI.

The RBI will continue with the neutral monetary policy stance and remain focussed on a durable alignment of inflation with the target, while supporting growth.

Growth and inflation outlook  

The global economy is growing slower than its historical average, even though trade remains strong. Challenges such as geopolitical tensions, inflation, and financial market uncertainties persist. A strong US dollar is also putting pressure on emerging markets.  

GDP to grow by 6.4% in FY 2025

In India, real GDP is expected to grow by 6.4% in 2024-25, driven by rising private consumption and a recovery in agriculture and services. However, industrial growth remains slow.

Economic growth in 2025-26 is projected at 6.7%, supported by better rabi crop prospects, improved industrial activity, and higher capital investments. Business sentiment remains positive, and strong services exports will continue to help. Risks include global trade policies, commodity price volatility, and geopolitical tensions.  

FY25 inflation projected at 4.8%

Inflation has eased since October 2024, mainly due to lower vegetable prices. Looking forward, food inflation is expected to fall further, helped by good harvests and stable supplies. Core inflation may rise slightly but should stay moderate.

For 2024-25, inflation is expected to be 4.8%, while for 2025-26, it is projected at 4.2%, assuming a normal monsoon. Risks to inflation include global financial instability, energy price fluctuations, and adverse weather conditions.

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