India Business Journal - RBI slashes Repo Rate by 25 basis points to 6.25% for the first time in five years

ECONOMY

RBI slashes Repo Rate by 25 basis points to 6.25% for the first time in five years

IBJ Bureau
Feb 08, 2025

The RBI’s Monetary Policy Committee (MPC) on Friday cut Repo Rate by 25 basis points to 6.25 per cent. The central bank’s rate cut for the first time in five years will provide long-awaited relief on interest rates and support economic growth, according to experts.

Chief Economist of Crisil Dharmakirti Joshi said that as expected, the MPC of the central bank cut rates for the first time on Friday since May 2020.

Mr Joshi added that the recent easing in Consumer Price Index (CPI) inflation and the need to remain supportive of economic growth have moved the RBI to act in this regard.

However, the MPC maintained the policy stance at “neutral”, which gives flexibility to remain data dependent and respond to exigencies, Mr Joshi said.

The MPC moves in the future will depend more on domestic inflation, he said.

“Elevated rates have impacted India’s GDP growth, while the Budget for the next financial year is mildly supportive of growth, while continuing on the path of fiscal consolidation,” he said.

Mr Joshi expressed hope that the MPC would cut the Repo Rate to another 75 basis points to 100 basis points in the next financial year.

Chief Investment Officer of Axis Securities PMS Naveen Kulkarni said: “The RBI reversed the interest rate cycle by announcing a rate cut of 25 basis points. This was largely anticipated.” The GDP growth for the current financial year has been revised downwards to 6.4 per cent from 6.6 per cent, he said.

Chairman of the Engineering Export Promotion Council (EEPC) India Pankaj Chadha, said that it welcomes the RBI’s decision, which will provide support to the economy by driving consumption.