RBI's Strategic Rate Cut: A Boost for a Sluggish Economy

RBI under new Governor Sanjay Malhotra reduced interest rates by 25 basis points to 6.25% for the first time in nearly five years, aligning monetary policy with fiscal incentives from Budget 2025-26 to stimulate the economy. The Monetary Policy Committee unanimously backed this decision, supporting growth amidst economic slowdown.

In a historic policy shift, the Reserve Bank of India (RBI) is set to revitalize the economy by reducing interest rates for the first time since May 2020. New RBI Governor Sanjay Malhotra, along with the Monetary Policy Committee, announced a 25 basis points cut, bringing the rate down to 6.25%.

This decision comes on the heels of Finance Minister Nirmala Sitharaman's record tax breaks for the middle class in the 2025-26 Budget, aiming to bolster consumer spending. The move seeks synergy between fiscal and monetary policies to rejuvenate an economy growing at its slowest pace post-pandemic.

Fiscal incentives coupled with the rate cut under the RBI's new leadership signal a cohesive strategy to lower the fiscal deficit, projected to be at 4.4% of GDP by FY26. The twin approach from the government and the central bank highlights a unified effort to ensure economic stability and growth.

(With inputs from agencies.)