The North News
Mumbai, June 6
The Reserve Bank of India (RBI) has cut the policy repo rate by 50 basis points to 5.50% with immediate effect, in a move aimed at boosting growth while keeping inflation within target.
The decision was made during the 55th meeting of the Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra, held from 4 to 6 June 2025. As a consequence of the rate cut, the standing deposit facility (SDF) rate now stands at 5.25%, while both the marginal standing facility (MSF) rate and the Bank Rate have been revised to 5.75%.
This policy stance is aligned with the central bank’s medium-term goal of maintaining consumer price index (CPI) inflation at 4%, within a tolerance band of ±2%, while also supporting economic growth.
Headline CPI inflation eased to 3.2% in April 2025 — a near six-year low — driven mainly by continued declines in food prices. Fuel prices, however, showed a reversal of deflationary trends due to rising LPG costs. India’s economy showed strong momentum in the last quarter of the previous fiscal year, with real GDP growth hitting 7.4% in Q4 2024-25, compared to 6.4% in Q3. The National Statistical Office (NSO) placed overall real GDP growth for 2024-25 at 6.5%.
Looking ahead, the RBI expects real GDP growth for 2025-26 to remain steady at 6.5%, buoyed by private consumption, rural demand, infrastructure spending, and the services sector. Risks from geopolitical tensions and global trade uncertainties, however, remain.
Despite subdued global conditions, market volatility has eased, equity markets have rebounded, and global commodity prices, including oil, have softened — although gold remains high.
The RBI said the rate decision was made by majority vote and reflects a balance between inflation control and the need to sustain economic momentum.
