The Reserve Bank of India (RBI) is expected to reduce interest rates on April 9, 2025.
The central bank’s Monetary Policy Committee (MPC) will begin its meeting on April 7, with the results being announced on April 9.
With retail inflation under control but economic growth still sluggish, many believe that the RBI has no choice but to lower interest rates.
Inflation Under Control:
Recent data shows that inflation has slowed significantly. The Consumer Price Index (CPI) inflation has dropped to around 3.6%, the lowest in the past seven months.
Food inflation has also eased, mainly due to a sharp drop in vegetable prices. This suggests that RBI’s target inflation rate of 4% is now achievable.
Sluggish Economic Growth:
Despite the easing inflation, the pace of economic growth remains slow.
In the third quarter of FY25, economic growth only slightly improved from 5.6% to 6.2%, falling short of expectations for a faster recovery.
Factors such as global economic uncertainty, fears of reciprocal tariffs, and geopolitical tensions have contributed to this sluggish growth.
RBI’s Focus Shifts to Growth:
There are strong indications that the RBI’s current focus is on boosting economic growth rather than just controlling inflation.
Experts predict that RBI may follow its February trend and reduce interest rates by 25 basis points in its April monetary policy review.
While concerns about imported inflation persist, the real risk now lies in the slow pace of economic growth.
Why the Rate Cut is Needed:
Despite previous steps taken by the RBI, liquidity in the financial system remains low. Strict monetary policies have made it harder for companies to access funding for investment.
To address this, experts believe the RBI needs to soften its stance on interest rates to help boost growth and liquidity.
If India aims to establish itself on the global stage, the RBI will need to make bold decisions to stimulate economic activity.
For people planning to buy homes or cars, this potential interest rate cut could bring some relief, making loans more affordable.
