CII: RBI MPC Decisions Aimed at Boosting Domestic Growth Amid Global Economic Uncertainty
New Delhi(The Uttam Hindu): The Confederation of Indian Industry (CII) stated that the Reserve Bank of India’s (RBI) accommodative monetary policy, alongside the government's growth-focused fiscal measures, will help bolster domestic growth in the face of global economic uncertainties. Chandrajit Banerjee, Director General of CII, described the RBI’s decision to continue its rate-cutting cycle by reducing the repo rate by 25 basis points to 6.0% as “timely and prudent.” He also welcomed the shift in the RBI's stance from 'neutral' to 'accommodative,' calling it a positive move that reinforces the central bank's pro-growth strategy while keeping inflationary risks in check.
“This change, which CII has long advocated, highlights the Central Bank's focus on growth while staying vigilant on inflation,” Banerjee said in a statement. The rate cut and the shift in policy stance are in response to concerns over the impact of global economic slowdown on India's growth, alongside a relatively stable domestic inflation outlook. CII also pointed out that with real interest rates still high at 2.6% following the previous rate cut in February, there was a pressing need for further reductions to stimulate investment demand. The immediate benefits of the rate cut are expected to enhance consumption, as lower borrowing costs will increase affordability, particularly in sectors like housing.
RBI Governor Sanjay Malhotra explained that the decision to lower the repo rate was made unanimously by the Monetary Policy Committee (MPC) after considering the macroeconomic conditions and future outlook. He also emphasized that, while inflation has decreased, the RBI will remain alert to global risks, including the potential effects of higher US tariffs, and ensure sufficient liquidity in the banking system. This marks the second consecutive 25 basis point rate reduction, following a similar cut in February, the first since May 2020. Lower policy rates generally lead to reduced bank loan interest rates, making borrowing easier for both consumers and businesses, thereby boosting consumption and investment, which contributes to economic growth.
