{"id":66108,"date":"2025-10-02T10:46:39","date_gmt":"2025-10-02T05:16:39","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=66108"},"modified":"2025-10-03T11:02:06","modified_gmt":"2025-10-03T05:32:06","slug":"rbi-holds-repo-rate-at-5-5-while-driving-growth-through-reforms","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/rbi-holds-repo-rate-at-5-5-while-driving-growth-through-reforms\/","title":{"rendered":"RBI Holds Repo Rate at 5.5% While Driving Growth Through Reforms"},"content":{"rendered":"<h2><b>RBI Repo Rate Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The <\/span><b>RBI\u2019s Monetary Policy Committee (MPC)<\/b><span style=\"font-weight: 400;\"> kept the <\/span><b>repo rate unchanged at 5.5%<\/b><span style=\"font-weight: 400;\"> with a \u2018neutral\u2019 stance on October 1, 2025, after already cutting rates by <\/span><b>100 bps this year<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">With retail inflation projected to average <\/span><b>2.6% in 2025-26<\/b><span style=\"font-weight: 400;\">, well below the 4% target, the RBI has space for future cuts but chose to <\/span><b>\u201ckeep its powder dry.\u201d<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Instead of relying only on rate changes, the RBI unveiled <\/span><b>22 structural measures<\/b><span style=\"font-weight: 400;\"> to spur growth through regulatory easing and reforms.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Economists noted the central bank\u2019s message: <\/span><b>growth support can extend beyond interest rates<\/b><span style=\"font-weight: 400;\">, with a focus on long-term stability and resilience.<\/span><\/li>\n<\/ul>\n<h2><b>RBI Monetary Policy October 2025: Growth Focus with Stability<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Repo rate unchanged at 5.5% with a neutral stance.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">A <\/span><b>neutral stance<\/b><span style=\"font-weight: 400;\"> implies that\u00a0the central bank neither seeks to stimulate the economy nor tighten liquidity, balancing efforts to control inflation without impeding growth.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">RBI balances growth momentum with financial stability.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Inflation projected well below target, creating policy space for future easing.<\/span><\/li>\n<\/ul>\n<h3><b>Stronger Growth Ahead<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">GDP growth forecast revised up to 6.8% for FY 2025-26 (from 6.5%).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Drivers: strong consumption, rising investments, government spending, good monsoon, GST 2.0, and better credit flow.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Quarterly projections: Q1 \u2013 7.8%, Q2 \u2013 7.0%, Q3 \u2013 6.4%, Q4 \u2013 6.2%.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">FY 2026-27 growth estimated at 6.6%, assuming stability and normal monsoon.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Consumer optimism remains high in both urban and rural households.<\/span><\/li>\n<\/ul>\n<h3><b>Global Agencies Reaffirm Growth<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Agencies highlight resilience amid global uncertainties:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">IMF \u2013 6.4% (FY26)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fitch \u2013 6.9% (FY26), 6.3% (FY27)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">S&amp;P Global \u2013 6.5% (FY26)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">UN \u2013 6.3% (FY26), 6.4% (FY27)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">OECD \u2013 6.7% (FY26)<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Confidence reinforced by structural reforms, strong domestic demand, and vibrant services sector.<\/span><\/li>\n<\/ul>\n<h3><b>Prices Stay Stable<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CPI inflation forecast cut to 2.6% for FY 2025-26 (earlier 3.1%).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Inflation fell to 1.6% in July 2025, an 8-year low.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Driven by 9-month food price decline (-10.5%) and milder summer temperatures.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">GST rationalisation (Sept 2025) reduced consumer prices for 11.4% of the CPI basket.<\/span><\/li>\n<\/ul>\n<h3><b>Global Demand Steady<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Current account deficit narrowed to 0.2% of GDP in Q1 FY 2025-26 (from 0.9% a year ago).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Supported by services exports and record remittances (US$35.3 billion).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Merchandise exports up 2.5%, imports up 2.1% (Apr\u2013Aug 2025).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gross FDI inflows at US$ 37.7 billion; net inflows at US$ 10.8 billion.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Major contributors: Singapore, US, Mauritius, UAE, Netherlands.<\/span><\/li>\n<\/ul>\n<h2><b>Why RBI Kept Repo Rate Unchanged<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">During recent MPC meet, the RBI adopted a <\/span><b>neutral stance<\/b><span style=\"font-weight: 400;\"> \u2014 recognising strong domestic momentum, low inflation, and reforms as positives, but staying vigilant about external risks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Stability is prioritised for now, while keeping options open for future rate action if needed.<\/span><\/li>\n<\/ul>\n<h3><b>External Headwinds: Global Uncertainty<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Trade tensions and tariffs with the US may hurt external demand.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Geopolitical risks and volatility in global financial markets remain downside risks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These global shocks could spill over into India\u2019s trade flows and capital markets, warranting caution.<\/span><\/li>\n<\/ul>\n<h3><b>Domestic Tailwinds: Growth Drivers<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>GDP Growth Upgrade<\/b><span style=\"font-weight: 400;\">: RBI revised FY26 projection to 6.8% from 6.5%, citing reforms and strong demand.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Reform Push<\/b><span style=\"font-weight: 400;\">: GST rationalisation and structural reforms announced in August are expected to cushion external shocks.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Agriculture &amp; Rural Boost<\/b><span style=\"font-weight: 400;\">: Above-normal monsoon, kharif sowing, and reservoir levels support farm output and rural demand.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Urban Consumption<\/b><span style=\"font-weight: 400;\">: Buoyancy in services sector and stable jobs lift consumption.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Investments Rising<\/b><span style=\"font-weight: 400;\">: Capacity utilisation, conducive financial conditions, and improving domestic demand will aid fixed investment.<\/span><\/li>\n<\/ul>\n<h3><b>Inflation: Well Within Comfort Zone<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>CPI Inflation Revised Down<\/b><span style=\"font-weight: 400;\">: FY26 forecast cut to 2.6% from 3.1%, driven by falling food prices and GST rationalisation.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Food Inflation Stable<\/b><span style=\"font-weight: 400;\">: Good harvest prospects and stable supply keep food prices in check.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Impact of GST Reforms<\/b><span style=\"font-weight: 400;\">: Lower CPI prices for multiple items reduce headline inflation.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Inflation trajectory firmly within the 2\u20136% RBI comfort zone, opening space for growth support later if needed.<\/span><\/li>\n<\/ul>\n<h3><b>Growth vs Risks: The Balancing Act<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Upside Surprise: Q1 FY26 GDP grew 7.8%, fastest in five quarters.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Caution Ahead: Q3 growth expected to slow due to trade frictions and tariffs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">MPC highlights that while domestic drivers are resilient, external vulnerabilities remain significant.<\/span><\/li>\n<\/ul>\n<h3><b>Rationale for Holding Rates<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Wait-and-Watch Approach<\/b><span style=\"font-weight: 400;\">: Earlier frontloaded monetary easing and fiscal measures are still working through the system.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Policy Flexibility<\/b><span style=\"font-weight: 400;\">: Keeping repo steady ensures the RBI retains room to cut if external shocks worsen.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Borrower Impact<\/b><span style=\"font-weight: 400;\">: Lending rates linked to repo remain unchanged; MCLR loans may adjust with banks\u2019 cost of funds.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b><strong> <a href=\"https:\/\/www.pib.gov.in\/PressReleasePage.aspx?PRID=2173560\" target=\"_blank\" rel=\"nofollow noopener\">PIB<\/a> | <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/rbi-monetary-policy-review-10281702\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/rbi-mpc-banking-regulations-repo-10281891\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RBI keeps repo rate unchanged at 5.5%, focuses on structural reforms and regulatory easing to boost growth while inflation stays below target.<\/p>\n","protected":false},"author":18,"featured_media":66184,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[60,3020,22,59],"class_list":{"0":"post-66108","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-mains-articles","9":"tag-rbi-repo-rate","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/66108","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=66108"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/66108\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/66184"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=66108"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=66108"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=66108"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}