Economic conditions & trends

India Cuts Interest Rates for First Time in Five Years

FEB 7 2025·Updated FEB 9 2025

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The Facts

The Reserve Bank of India (RBI) on Friday reduced its benchmark repo rate by 25 basis points to 6.25%, marking the first rate cut since May 2020.
NDTV
The Times of India
RBI Governor Sanjay Malhotra said that a less restrictive monetary policy was appropriate given current growth-inflation dynamics and that the Monetary Policy Committee maintains a neutral policy stance.
Reuters
NDTV
The rate cut follows the government's recent announcement of significant tax cuts, raising the income tax threshold from $8K to $14.8K to stimulate consumer spending and economic growth.
Al Jazeera
The Economic Times
This comes after India's GDP growth dropped to 5.4% in July-September from previous rates of 6.7% and 7.8%. The government has forecast growth of 6.4% for fiscal year 2024-25.
Al Jazeera
Wsj
Retail inflation eased to 5.22% in December, though still above the RBI's 4% target. The central bank forecasts inflation to average 4.8% in the current financial year and 4.2% in the next.
Reuters
The Hindu
Meanwhile, the Indian rupee strengthened modestly following the announcement, with the RBI actively intervening in foreign exchange markets to prevent sudden capital outflows and currency depreciation.
CNBC
NDTV Profit

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

PRO
ESTAB

The Spin

Narrative A

The rate cut is necessary to revive economic growth and boost urban consumption. It complements recent tax measures and supports credit flow to businesses — particularly as high-frequency indicators suggest economic resilience despite global challenges.

Reuters

Firstpost

Narrative B

The decision to cut rates amid persistent inflation above target levels and currency pressures could risk further price increases and capital outflows, potentially complicating the central bank's efforts to maintain financial stability.