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Below the Quote on RBI Policy - Avoiding pressure on rupee - reducing dependence on USD by Ajay Garg, CEO, SMC Global Securities

Despite the Fed rate cut of 25 bps, the RBI has decided to keep the repo rate unchanged at 5.5%. This widens the interest differential between the two economies, potentially attracting renewed FII interest in India for better yields. There was no rate cut this time, as the RBI is taking a wait-and-watch approach while evaluating the impact of previous rate cuts on the economy. Another reason for holding rates may be to avoid putting further downward pressure on the Indian rupee. Reforms for ease of doing business will streamline compliance, benefiting exporters and foreign entities, while supporting a resilient external sector, with the current account deficit projected at just 0.2% of GDP. At the same time, efforts to internationalize the Indian Rupee could reduce dependence on the U.S. dollar, boost regional trade, and elevate India’s global financial presence, with full impacts expected by 2027 amid ongoing global uncertainties.

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