In a significant move to stimulate economic growth, the Reserve Bank of India (RBI) announced a 25 basis point reduction in its key lending rate on Friday. This marks the first rate cut by the RBI since May 2020, adjusting the policy repo rate from 6.5 percent to 6.25 percent.
The decision comes during a bimonthly review where the RBI maintained a \"neutral\" monetary policy stance amidst weaker-than-expected GDP growth of 5.4 percent for the July-September 2024 quarter. This rate cut is aimed at countering the slowdown ahead of the upcoming October-December GDP figures set to be released later this month.
Newly appointed RBI Governor Sanjay Malhotra stated that the current growth-inflation dynamics have provided the central bank with the necessary policy space to support economic expansion. He noted that while growth is anticipated to recover from the previous quarter's low, it remains significantly below the 8.2 percent growth recorded in the 2023-2024 fiscal year.
Governor Malhotra emphasized the challenges ahead, saying, \"Excessive volatility in global financial markets and continued uncertainties about global trade policies coupled with adverse weather events pose risks to the growth and inflation outlook.\" This cautious outlook underscores the RBI's proactive measures to foster a stable economic environment.
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India's RBI announces first rate cut since 2020 amid slowing growth
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