The Reserve Bank of India (RBI) Governor Sanjay Malhotra announced a 25 basis points cut in the repo rate during the Monetary Policy Committee (MPC) meeting held on February 7, 2025. This decision marks a significant shift in the central bank's stance, reflecting growing confidence in India's economic recovery and a commitment to sustaining growth momentum. The repo rate now stands at 5.75%, the lowest in over a decade, signaling a favorable environment for borrowers and businesses alike. 
The MPC's decision comes against the backdrop of a robust economic outlook, with India's GDP growth projected at 7.5% for the fiscal year 2024-25. Governor Malhotra emphasized that the rate cut is aimed at bolstering domestic demand, particularly in the wake of the Union Budget 2025, which prioritized infrastructure development, rural welfare, and digital transformation.
Finance Minister Nirmala Sitharaman, who presented the Union Budget earlier this month, welcomed the RBI's decision, stating that it aligns with the government's vision of achieving a $10 trillion economy by 2030.
The MPC's decision comes against the backdrop of a robust economic outlook, with India's GDP growth projected at 7.5% for the fiscal year 2024-25. Governor Malhotra emphasized that the rate cut is aimed at bolstering domestic demand, particularly in the wake of the Union Budget 2025, which prioritized infrastructure development, rural welfare, and digital transformation.
"The Indian economy is on a strong footing, and this rate cut is a proactive measure to ensure that growth remains inclusive and sustainable," Malhotra stated during his address.The announcement was met with widespread approval from industry leaders and economists, who believe the rate cut will stimulate investment and consumption.
"This is a timely decision that will lower borrowing costs for businesses and individuals, thereby fueling economic activity," said Ashishkumar Chauhan, CEO of the National Stock Exchange.The banking sector is also expected to benefit, with lower interest rates likely to boost credit growth and improve asset quality.
Finance Minister Nirmala Sitharaman, who presented the Union Budget earlier this month, welcomed the RBI's decision, stating that it aligns with the government's vision of achieving a $10 trillion economy by 2030.
"The synergy between fiscal and monetary policy is crucial for India's growth trajectory, and today's rate cut is a testament to that," Sitharaman remarked.However, the MPC also cautioned about potential risks, including global inflationary pressures and geopolitical uncertainties. While India's inflation rate remains within the RBI's target range of 4-6%, the committee highlighted the need for vigilance in monitoring external factors that could disrupt domestic stability.
"We are committed to maintaining price stability while supporting growth," Malhotra said.The rate cut is expected to have a cascading effect on various sectors, including real estate, automobiles, and consumer durables, which are highly sensitive to interest rate changes. Homebuyers, in particular, are likely to benefit from lower equated monthly installments (EMIs), making housing more affordable.
"This is a golden opportunity for first-time homebuyers to enter the market," said Pradeep Aggarwal, founder of Signature Global, a leading real estate developer.
The RBI's decision to cut the repo rate underscores its confidence in India's economic resilience and its commitment to fostering growth. As the nation navigates a complex global environment, the collaboration between the central bank and the government will be pivotal in ensuring that India remains on a path of sustained and inclusive development. With the Union Budget 2025 laying the foundation for long-term growth, the rate cut serves as a catalyst to accelerate India's journey toward becoming a global economic powerhouse.
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