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Below the View on Post Monetary Policy Committee by Dr. Ravi Singh, SVP- Retail Research, Religare Broking Ltd

"Newly appointed RBI Governor Sanjay Malhotra cuts repo rate by 25 bps to 6.25% from 6.5%, marking the first rate cut in nearly five years. The announcement comes shortly after the government slashed personal income tax in Budget’26 to boost disposable income, which is expected to impact retail spending positively.

This repo rate cut has provided significant relief to home loan borrowers as it could lead to lower interest rates on home loans. The decision completely aligns with the market expectations, as a recent Reuters poll shows over 70% of participants had forecasted a 25 bps rate cut.

According to the First Advance Estimates (FAE), a real GDP is expected to grow by 6.4% YoY in FY25, driven by a recovery in private consumption. Growth is supported by the services and agriculture sectors, while industrial growth remains weak. For 2025-26, economic growth is projected at 6.7%, with Q1 at 6.7%, Q2 at 7.0%, and Q3 & Q4 at 6.5% each.

Key growth drivers include strong household consumption due to tax relief in the Union Budget, improved fixed investment, and resilient services exports. Headline inflation eased in November-December 2024 after peaking at 6.2% in October with food inflation moderating due to a decline in vegetable prices, while core inflation remained subdued."

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