Mumbai, Dec 5: The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) on Friday unanimously decided to reduce the repo rate by 25 basis points to 5.25 percent with immediate effect, while retaining a ‘neutral’ monetary stance.
RBI Governor Sanjay Malhotra announced the policy decision after the conclusion of the three-day MPC meeting held from December 3 to 5.
The MPC voted unanimously to reduce the policy repo rate under the liquidity adjustment facility (LAF) to 5.25 percent.
Consequently, the standing deposit facility (SDF) rate shall stand adjusted to 5 percent and the marginal standing facility (MSF) rate and the Bank Rate to 5.50 percent, RBI Governor said in his speech.
Governor Malhotra said the Indian economy is projected to grow at 7.3 percent in the current fiscal, which is about a half percentage point higher than previously estimated.
He said for Q3 and Q4 2025-26, the growth is projected at 7 percent and 6.5 percent, respectively while for Q1 and Q2 2026-27, the GDP numbers are projected at 6.7 percent and 6.8 percent, respectively.
On the supply side, real gross value added (GVA) expanded by 8.1 percent, aided by buoyant industrial and services sectors.
The Governor said the high-frequency indicators suggest that domestic economic activity is holding up in Q3, although there are some emerging signs of weakness in a few leading indicators.
On inflation, the RBI Governor said the CPI inflation for 2025-26 is now projected at 2percent with Q3 at 0.6percent; and Q4 at 2.9percent. CPI inflation for Q1 2026-27 and Q2 are projected at 3.9percent and 4percent, respectively, he said.
GST rationalisation and festival-related spending supported domestic demand during October-November, he said.
The rural demand continues to be robust, while urban demand is recovering steadily, and the investment activity remains healthy with private investment gaining steam on the back of expansion in non-food bank credit and high capacity utilisation.
Merchandise exports declined sharply in October amid subdued external demand, accompanied by softer services exports.
On the supply side, agricultural growth is supported by healthy kharif crop production, higher reservoir levels, and better rabi crop sowing. Manufacturing activity continues to improve, and the services sector is maintaining a steady pace,” the RBI Governor said in his speech.
Looking ahead, domestic factors such as healthy agricultural prospects, continued impact of GST rationalisation, benign inflation, healthy balance sheets of corporates and financial institutions and congenial monetary and financial conditions should continue to support economic activity, he said. (UNI)
