RBI Slashes Repo Rate to Tackle Economic Slowdown

The Reserve Bank of India cut its repo rate for the first time in five years to stimulate the economy, expected to grow at its slowest pace in four years. The 25 basis points cut to 6.25% was anticipated by economists and aims to support growth amid easing inflation dynamics.

In a significant move, the Reserve Bank of India (RBI) reduced its key repo rate by 25 basis points to 6.25%, marking the first rate cut in nearly five years. This decision comes as India's economy grapples with sluggish growth, forecasted to hit its slowest pace in four years.

The Monetary Policy Committee (MPC), comprising three RBI and three external members, unanimously voted for the rate cut, maintaining a neutral monetary policy stance. Governor Sanjay Malhotra highlighted inflation easing as a key factor facilitating the rate reduction, despite growth predictions below initial government forecasts.

India's growth is projected at 6.4% for the current fiscal year, hindered by a weaker manufacturing sector and slow corporate investments. However, improved employment, tax cuts, and strong agricultural performance following a favorable monsoon are expected to boost growth. The RBI foresees inflation averaging 4.8% this year, dropping to 4.2% next year.

(With inputs from agencies.)