Repo rate cut

The Reserve Bank of India’s (RBI) decision to cut the repo rate by 25 basis points — from 6.25 per cent to 6 per cent — marks the second successive reduction this year. It reflects the central bank’s growing concern over economic momentum amid global headwinds. With Governor Sanjay Malhotra’s Monetary Policy Committee now adopting an ‘accommodative’ stance, the move signals a shift in priorities — from inflation containment to growth revival.

The decision comes at a time of rising uncertainty triggered by external shocks, including trade tensions and tariff woes stemming from the US. Domestically, the slowdown in consumption and muted private investment continue to weigh on growth prospects. The RBI has revised its GDP growth forecast down to 6.5 per cent, underscoring the challenges ahead. For borrowers, especially in the housing and auto sectors, the rate cut offers a reprieve — potentially lowering EMIs and encouraging fresh loans. However, for savers, particularly those reliant on fixed deposits, falling interest rates may erode real returns, sparking a need to rethink investment strategies.

While rate cuts are a necessary tool in the monetary arsenal, they are no panacea. The RBI must remain vigilant against inflationary pressures and currency volatility that could arise from a prolonged easing cycle. Additionally, transmission of these cuts by banks to consumers remains a persistent hurdle. Ultimately, this rate cut sends a clear message: the central bank is willing to act pre-emptively to support growth. But the efficacy of this move hinges on complementary fiscal measures and structural reforms. Without those, monetary policy alone may struggle to lift the economy out of its current malaise.

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