RBI MPC Reaction: Vijay Kuppa, CEO, InCred Money

7 Feb 2025 , 01:01 PM

The Reserve Bank of India just cut the repo rate by 25 basis points to 6.25%—the first rate cut in nearly five years. It’s a big move, and one that signals a shift in focus: supporting growth while keeping inflation in check.

Inflation has been cooling, thanks to stable food prices and a healthy rabi crop outlook. At the same time, India’s economy, while resilient, needs a push—especially with global uncertainties, volatile energy prices, and trade tensions looming. By cutting rates, the RBI is making borrowing cheaper, which in turn should spur investments, business expansion, and consumer spending.

For individuals, this means lower EMIs on home and business loans, making big-ticket purchases more attractive. But on the flip side, fixed deposit rates may soften, discouraging savings and pushing people to either spend or invest in equities. The stock market, already buoyant, could see further gains as liquidity improves.

This move also ties in well with the recent Union Budget’s tax relief, which raised the rebate limit from ₹7 lakh to ₹12 lakh. More disposable income, coupled with lower borrowing costs, creates a perfect recipe for stronger household consumption—one of India’s biggest growth drivers.

That said, the RBI is staying neutral on its policy stance, meaning it’s watching global risks carefully before making further moves. For now, this rate cut is a well-timed boost that aligns with India’s growth ambitions. And with both monetary and fiscal policies pulling in the same direction, the coming months could see stronger momentum across sectors.