Will the Repo rate be cut for the first time in 5 years..?!

After Sanjay Malhotra took over as the governor of the Reserve Bank, the country's benchmark interest rate, the repo rate, is likely to be reduced. If this happens, it will be the first time that the repo rate has been reduced in the last five years. This interest rate cut is expected to be done with an aim to promote economic growth. In a survey conducted by Reuters and Bloomberg, a majority of economists (more than 70%) predicted a 25 basis point interest rate cut. With this, the repo rate will come down to 6.25% from 6.5%.
The recent personal income tax cut announced by the central government has increased the expectation of this interest rate cut. While steps are being taken by the Finance Ministry and the central government to improve the country's consumer market and revive the economy from a sluggish state, the chances of a reduction in the repo rate seem very high, especially after the budget announcement. The government has set a target of reducing the government's fiscal deficit, which was set at 4.8% of GDP in the current financial year, to 4.4% in the next financial year. Similarly, the economic growth rate, which was 8.2% in the last financial year, is currently expected to decline to 6.4%. Although inflation in the country continues to be a threat, the RBI seems likely to consider a cut in interest rates as the rupee is depreciating.
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Sowmiya Sriram

07/02/2025 09:30 AM