Is RBI's Decision to Hold Repo Rate at 5.5% Wise Amid Global Uncertainties?
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Synopsis
The Reserve Bank of India has decided to keep the repo rate at 5.5%. Dr. Manoranjan Sharma calls this move wise amid global economic challenges. The decision reflects the current inflation rate and India's robust growth trajectory.
Key Takeaways
- RBI maintains repo rate at 5.5%.
- Current global economic uncertainties have influenced this decision.
- Projected inflation stands at 3.7%.
- Economic growth is stable at 6.5%.
- GST is a structural reform, not a direct factor in interest rates.
New Delhi, Oct 1 (NationPress) The Reserve Bank of India’s (RBI) choice to keep the repo rate steady at 5.5 percent is considered wise and sensible amid the ongoing global economic turbulence, as stated by economist Dr. Manoranjan Sharma on Wednesday.
In an interview with IANS, Dr. Sharma mentioned that the majority of economists had foreseen this stability in the October monetary policy, especially in light of the persistent Israel-Hamas conflict in the Middle East, the ongoing Russia-Ukraine war, and the ramifications of US tariffs.
He remarked, “Crude oil prices are fluctuating, and the country’s growth rate is at 6.5 percent. In this context, the RBI’s decision appears well-thought-out.”
Dr. Sharma further emphasized that the RBI’s monetary policy choices are not directly tied to GST. “Interest rates are determined by the central bank based on broader economic circumstances. GST represents a structural reform that is poised to enhance consumption and foster growth,” he added.
The economist anticipates that India’s inflation will stabilize around 3.7 percent this financial year, a figure he considers manageable given India's status as the world's fastest-growing economy.
According to the policy announcement, the RBI has opted to keep the repo rate unchanged at 5.50 percent and has maintained its monetary policy stance as “neutral.” The Standing Deposit Facility (SDF) continues to remain at 5.25 percent, while the Marginal Standing Facility (MSF) is at 5.75 percent.
RBI Governor Sanjay Malhotra, during his policy address, underscored that the economy is showing strong performance, with inflation decreasing due to favorable monsoon conditions. He also noted that GST rate reductions have bolstered consumption and accelerated growth.
This marks the second consecutive occasion that the RBI has opted to keep the repo rate steady, following a similar decision in the August MPC meeting. Since the start of 2025, the central bank has, however, decreased the repo rate by a total of 1 percentage point - with cuts of 25 basis points each in February and April, followed by a larger 50 basis points cut in June.
Point of View
Our perspective emphasizes the RBI's prudent monetary policy decisions in response to global economic conditions. Consistent repo rates reflect stability, fostering confidence in India's economic trajectory.
NationPress
01/10/2025
Frequently Asked Questions
What is the current repo rate set by RBI?
The current repo rate set by the Reserve Bank of India is 5.5%.
Why did RBI decide to hold the repo rate?
The RBI's decision to maintain the repo rate is based on prevailing global economic uncertainties and stable inflation projections.
How does GST affect RBI's monetary policy?
GST does not directly influence the RBI's monetary policy, as interest rates are determined by broader economic conditions.
What is the expected inflation rate for India?
The expected inflation rate for India is projected to hover around 3.7% for the current financial year.
What are the implications of the repo rate on the economy?
The repo rate influences borrowing costs, thus affecting consumption, investment, and overall economic growth.
