RBI rate cut by RBI governor Sanjay Malhotra: RBI reduced the repo rate for the first time in 5 years under 1st monetary policy by New RBI Governor Sanjay Malhotra. It is said to be a significant move and can lead to revitalizing Slowed economy of INDIA. As per reports RBI Governor announces 25 basis point decrement to bring down the Repo rate to 6.25%. This is considered a strategic move to regulate growth amid inflationary pressures.
Background context of RBI repo rate cut:
The persistent inflation in Indian economy was causing deacceleration of overall growth which can be seen in many parameters as GDP(Gross domestic Product) growth was slowing down at a rate of 5.4% since last September which was lowest in last two years. And inflation stood at 5.2% in December. these parameters were exerting pressure on central banks to adopt measure to stimulate economic growth.
RBI Governor Sanjay Malhotra‘s Monetary policy:
Sanjay Malhotra who took charge in December as RBI Governor moderated over his First Monetary Policy committee meeting leading to a historic move of Pivotal rate cut.
He earlier chaired as revenue secretary work extensively in strategizing public policy, is getting appreciation of his perceived experience on how to make a policy in favour of growth. His efforts majorly brings balance to growth imperatives with respect to inflation control.
Market reaction
The rate cut by RBI governor has got varied responses. INR which was weakening with respect to dollar since fortnight, got a raise of 0.2% for the day. equity markets are seeing positive shifts and expecting gains with rate sensitive sectors. Nifty 50 responded by increment of 0.35% from the last day and BSE Sensex gained 0.28%.
The economist and financial analysts are largely interpreting this cut to be bolstering economic growth.
RBI governor Sanjay Malhotra Growth initiatives
The growth promise by this repo rate cut which can lead to decrease in EMI amount along with the tax relaxation up to 12 lakh income bracket is both consecutive good news providing some relaxation to middle class pockets.
Challenges involving RBI rate cut
Challenges in this policy persists despite it being proactive stance as Since 2024 rupee weakened in comparison to dollars hitting record low raises the concern of inflation at its rise. In addition to that the global ambiguities and geopolitical strains along with divergent monetary strategy can risk economic Stability.
While the strategic policy being welcomed by all to enhance consumption and leading to economic growth central bank is cautious about possible risks it may outlays and doing efforts to stabilize the situation.