Repo Rate Cut After Five Years as Indian Economy Remains Strong

The Reserve Bank of India Governor Sanjay Malhotra announced a 25 basis point reduction in the repo rate to 6.25%, marking the first cut since May 2020. The Indian economy is strong, with a GDP growth forecast of 6.7% for FY'26. Inflation is expected to decrease, and food inflation pressures are likely to ease.

In a significant move, the Reserve Bank of India, under the leadership of Governor Sanjay Malhotra, has decreased the repo rate by 25 basis points to 6.25%. This reduction, the first in five years, highlights the central bank's confidence in the Indian economy's resilience.

According to the announced monetary policy, the RBI anticipates a GDP growth rate of 6.7% for the fiscal year 2026. Inflation rates are projected to drop to 4.2% from 4.8% in the previous year, signaling potential relief in food inflation pressures despite core inflation expecting a modest rise.

The central bank also emphasized the robust state of India's forex reserves, which stand at USD 630.6 billion. This reserve level assures more than ten months of import cover, underscoring the economy's ability to weather global economic challenges. The Monetary Policy Committee is scheduled to reconvene in early April.