RBI Governor Sanjay Malhotra said that the repo rate was cut by 25 basis points to 6.25%, GDP growth rate is estimated to be 6.7%

RBI MPC Meeting 2025 LIVE: RBI Governor Sanjay Malhotra announced that the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to cut the repo rate by 25 basis points to 6.25% from 6.5%.

The RBI has also projected GDP growth at 6.7% for FY 2025-26. Inflation forecast for FY 26 was announced at 4.2%. Economists and experts believed that the MPC would announce a 25 basis point cut in the repo rate.

This is the first monetary policy meeting after Sanjay Malhotra took over as the new RBI governor. This is the first time in five years that the central bank has cut rates.

RBI's monetary policy comes just after the Union Budget 2025. Finance Minister Nirmala Sitharaman announced major changes in income tax in Budget 2025, aimed at boosting consumption and putting economic growth back on track.

Why was the repo rate cut?

This is the first time in five years that the RBI's MPC has decided to cut the repo rate. The last rate cut was announced in 2020 to counter the adverse economic impact of the Covid pandemic.

Need for neutral stance

Taking into account the current growth-inflation dynamics, the MPC continued with the neutral stance and felt that a less restrictive monetary policy is more appropriate at the present time.

RBI Governor Sanjay Malhotra said that we are committed to conducting monetary policy and taking measures that are appropriate, timely, carefully calibrated and clearly communicated, so as to create favourable macroeconomic conditions that reinforce price stability, sustainable economic growth and financial stability.

Moderation in headline inflation

Headline inflation in November-December 2024 eased sequentially from its recent peak of 6.2 per cent in October. Moderation in food inflation, as vegetable price inflation eased from the October high, fuelled the decline in headline inflation.

6.4% GDP growth in FY25

On the domestic front, as per the first advance estimate (FAE), real gross domestic product (GDP) is projected to grow by 6.4 per cent (year-on-year) in 2024-25, led by an improvement in private consumption.