In a significant move signaling a pivot towards supporting growth, the Reserve Bank of India (RBI) has released its Monetary Policy Statement for FY 2025-26, following the 54th meeting of the Monetary Policy Committee (MPC) held from April 7 to 9, 2025. Against a backdrop of moderating inflation and uneven global recovery, the central bank has opted for a rate cut and a shift in policy stance.
Here are the key takeaways:
🔻 Repo Rate Cut: A Clear Signal for Growth Support
The MPC unanimously voted to reduce the policy repo rate by 25 basis points to 6.00%. This move also adjusted other key rates:
Standing Deposit Facility (SDF): 5.75%
Marginal Standing Facility (MSF): 6.25%
Bank Rate: 6.25%
This decision aims to keep inflation aligned with the medium-term target of 4% (±2%), while creating more headroom to support economic growth.
🧾 Why the Rate Cut Now?
The decision is anchored in two key observations:
Inflation is under control — Headline CPI inflation has dropped below the 4% target, with February 2025 seeing a low of 3.6%, thanks to sharp declines in food prices and easing crude oil prices.
Growth needs nurturing — The economy is still recovering from a sluggish first half of 2024-25. In a world rife with uncertainty—be it from trade disruptions or geopolitical tensions—the MPC felt it necessary to extend more support to the growth recovery.
In line with this, the MPC also voted to change its policy stance from ‘neutral’ to ‘accommodative’, a notable shift indicating a more supportive approach in the near term. However, the Committee emphasized continued vigilance and flexibility in response to evolving economic conditions.
📈 Growth Outlook: Optimism with a Cautious Lens
The real GDP growth for FY 2025-26 is projected at 6.5%, mirroring the estimate for 2024-25 by the National Statistics Office (NSO). Quarterly growth forecasts are:
Q1: 6.5%
Q2: 6.7%
Q3: 6.6%
Q4: 6.3%
Growth drivers include:
A revival in urban consumption
Continued rural demand
Government-led capital expenditure
Corporate and banking sector resilience
While services exports are expected to remain strong, merchandise exports may face challenges due to uncertain global demand.
🛒 Inflation Outlook: Comfortably in Check
Inflation trends are reassuring. With vegetable prices correcting sharply and rabi crop prospects looking excellent, food inflation has significantly eased. Crude oil price declines have also supported the disinflationary trend.
Assuming a normal monsoon, the CPI inflation forecast for 2025-26 is pegged at 4.0%, with quarterly estimates as follows:
Q1: 3.6%
Q2: 3.9%
Q3: 3.8%
Q4: 4.4%
The risks to this forecast are seen as evenly balanced, though global volatility and weather-related supply shocks could introduce some upside pressure.
