The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) concluded its three-day meeting on December 6. Governor Shaktikanta Das announced key decisions, including maintaining the repo rate at 6.5% and cutting the Cash Reserve Ratio (CRR) by 50 basis points to 4%. This CRR reduction will inject ₹1.16 lakh crore into the financial system, aiming to boost liquidity.
Das emphasized balancing inflation and growth. The central bank revised its FY25 GDP growth projection to 6.6% from 7.2%, citing weaker-than-expected Q2 GDP growth of 5.4%. On inflation, the RBI raised its FY25 Consumer Price Index (CPI) forecast to 4.8%, with food price corrections expected to ease pressures in the coming quarter. However, geopolitical tensions and global market volatility pose risks to inflation.
The governor highlighted measures to strengthen economic resilience. Interest rate ceilings on FCNR-B deposits were raised by 400 basis points to attract foreign investments. Additionally, small finance banks can now offer pre-sanctioned credit lines through UPI, promoting financial inclusion and formal credit access.
For agriculture, the collateral-free loan limit was increased from ₹1.6 lakh to ₹2 lakh per borrower. This move addresses rising agricultural input costs and supports small and marginal farmers. Infrastructure sectors, including cement and steel, are expected to benefit from increased government capital expenditure.
The RBI observed that economic activity is rebounding, supported by rising consumer and business confidence. Strong festival demand and improved rural consumption point to recovery. However, persistent inflation challenges require vigilance, as high prices erode purchasing power.
Stock markets reacted to the policy announcements. The Sensex dropped over 200 points, and the Nifty 50 fell nearly 88 points after the central bank maintained the repo rate. Despite short-term headwinds, Das assured that India is positioned to leverage emerging global trends.
The MPC reaffirmed its neutral monetary policy stance, with a focus on long-term price stability and sustained growth. Looking ahead, GDP growth for Q3FY25 is projected at 6.8%, and Q4FY25 at 7.2%. Inflation for Q3FY25 is expected to reach 5.7%, easing to 4.5% by Q4FY25.
The RBI’s policy underscores the dual priorities of containing inflation and fostering economic recovery. While uncertainties persist, structural reforms and targeted interventions aim to navigate the challenges and sustain growth momentum.
