RBI's Timely Rate Cut to Boost India's Economic Growth Amid Low Inflation

The Reserve Bank of India’s repo rate cut is deemed a necessary and timely move amid drooping inflation and moderated growth forecasts. Expert economists view it as a right step under evolving economic conditions, with careful considerations given to global scenarios and domestic fiscal space.

The Reserve Bank of India's (RBI) recent decision to cut the repo rate by 25 basis points in its Monetary Policy Committee meeting is being lauded as a timely and appropriate measure to address unusually low inflation and anticipated moderation in economic growth. Rajani Sinha, the chief economist at CareEdge Group, emphasized this decision during an online interview with ANI, highlighting the central bank's well-timed intervention.

Sinha explained that while strong GDP growth has been recorded, it is somewhat statistical due to low base effects and an uncommonly low deflator. She projects a slight moderation in India's growth momentum in the second half of the fiscal year, with growth forecast dropping from eight percent in the first half to around seven percent in the second half, due to various economic factors.

Despite expecting a softer growth outlook, Sinha does not foresee a need for further rate cuts next year, with GDP growth projected at 7% and inflation likely to rise slightly. She noted the RBI's preparedness to adapt to worsening global conditions, pointing out RBI's dovish stance amid international uncertainties. Additionally, bond yields are expected to ease, with market players monitoring credit growth and the rupee's gradual stabilization.

(With inputs from agencies.)