RBI's Cautious Policy Stance

Central bank's first interest rate cut in five years is minimal and unsurprising considering the many external volatilities

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The RBI Monetary Policy Committee (MPC) has finally reduced interest rates—by 25 basis points to 6.25%; one basis point is one-hundredth of a percentage point—after five years or May 2020, to be precise. This comes against the backdrop of a sharp slowdown in GDP growth in the current fiscal year (2024-25). RBI's and finance ministry's assessment (as per the 2024-25 Economic Survey) is that GDP growth will continue to be sub-7% for the next fiscal year as well. MPC expects it to be 6.6%, which is within the Economic Survey's range of 6.3%-6.8%. The Union Budget has already done its bit to boost growth with the upward revision in income tax slabs which, it estimates, will boost the disposable incomes by ₹1 lakh crore.