RBI Cuts Repo Rate to Boost Growth Amid Cooling Inflation, Maintains GDP Outlook

The Reserve Bank of India (RBI) has taken a proactive stance to support the economy, unveiling a series of rate cuts and liquidity measures as part of its annual report and the latest Monetary Policy Committee (MPC) review. With inflation easing and growth concerns emerging, the central bank cut the key repo rate by 50 basis points in June, bringing it down to 5.50%. This follows earlier reductions in February and April, indicating a front-loaded approach to monetary easing.

Alongside the rate cut, the RBI also reduced the Cash Reserve Ratio (CRR) by 100 basis points, aimed at infusing nearly ₹2.5 lakh crore of liquidity into the banking system. The move is designed to stimulate lending and consumer spending, especially in sectors such as housing and retail loans.

The RBI cited a significant drop in consumer price inflation, which fell to 2.82% in May—the lowest in six years—as a key reason behind the easing. This, coupled with stable inflation expectations, gave the MPC the confidence to shift its stance from accommodative to neutral while maintaining a real GDP growth forecast of 6.5% for 2025–26.

The central bank expects these measures to encourage private investment and credit growth, while also reducing borrowing costs for consumers. However, it flagged global uncertainties, including the Israel–Iran conflict and volatile trade conditions, as potential risks to the economic outlook.

Analysts suggest further rate cuts may be limited as the RBI monitors inflation and external shocks. Nonetheless, the current monetary actions are seen as a timely effort to boost domestic demand and safeguard India’s growth momentum.