RBI: Lower repo rate boosts consumption

Minutes of the RBI MPC: On April 9, the RBI Governor Sanjay Malhotra-led MPC lowered the repo rate, or short-term lending rate, by 0.25 percent to 6 percent. The same reduction was made in February as well. The central bank has made the relevant minutes public. Please tell us more about this.

Policy rate reductions will increase private investment and private consumption. Earlier this month, at a meeting of the Monetary Policy Committee (MPC), Reserve Bank of India Governor Sanjay Malhotra stated as much. Malhotra and five other MPC members supported a 0.25 percent reduction in the repo rate during this time.

The Governor Malhotra-led MPC lowered the short-term lending rate, or repo, from 0.25 percent to 6 percent on April 9. This cut was likewise made in February.

On Wednesday, the RBI made the MPC meeting details public. It stated, “When inflation based on consumer prices is decisively around its target level of four percent and growth is still normal and improving, then monetary policy should support domestic demand to accelerate the pace of growth.”

During the discussion, Malhotra said that this would boost private corporate investment and private spending. He stated that monetary policy should be further liberalized in light of the new growth-inflation tendencies. The MPC’s next meeting is scheduled for June 4-6, 2025.

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