The RBI's Balancing Act: Strategy and Execution in 2025

In 2025, the Reserve Bank of India (RBI) has adopted a cautious yet steady monetary policy, distinguishing itself from the more aggressive actions of several global central banks.

- Madhusudhanan S

Since June 2025, it has maintained the repo rate at 5.5%, signalling a deliberate policy of restraint and close observation. This approach comes even as some economies continue tightening to curb inflation while others loosen rates to spur growth. This steady stance reflects the RBI's confidence in India's strong macroeconomic fundamentals. With inflation moderating and growth remaining robust, the central bank has been able to focus on financial stability without undermining economic momentum.

Inflation and Fostering GDP Growth

Headline CPI inflation eased to 4.9% in October 2025, comfortably within the RBI's target range of 2-6%. Stable fuel prices and improved supply conditions have also contributed to a decline in core inflation. Meanwhile, India's real GDP expanded by 7.8% year-on-year in the second quarter of FY 25, driven by manufacturing, services, and public infrastructure investment. The RBI's core strategy has been to balance growth support while keeping inflation expectations anchored.

RBI's Tactical Tools Beyond Interest Rates