Post by : Raman

India’s Monetary Policy Committee (MPC), led by Reserve Bank of India (RBI) Governor Sanjay Malhotra, is set to announce its repo rate decision on Wednesday, 1 October, amid a complex economic environment that balances inflation, growth, and external pressures, including 50% US tariffs on Indian exports.

India’s inflation remains near the lower end of the RBI’s 2%-6% target range and is expected to ease further following recent reductions in GST rates. Despite this, GDP growth has remained robust, with the April-June 2025 quarter recording a surprising 7.8%. However, the imposition of high US tariffs on Indian goods is expected to slow economic momentum. The Indian rupee has also weakened to record lows against the US dollar, creating additional considerations for monetary policy decisions.

Economists are divided on the expected repo rate decision. A majority predict the RBI will maintain the repo rate at 5.5%, while others expect a quarter-point reduction. Even among those anticipating no change, many believe there is justification for easing given the current economic conditions. The US Federal Reserve’s recent rate cut further allows the RBI some room for flexibility in adjusting domestic interest rates.

So far in 2025, the RBI has reduced the repo rate by 100 basis points in three separate tranches but chose to maintain rates at the last MPC meeting in August. Analysts emphasize that Governor Malhotra’s statements and outlook on economic growth and inflation during the announcement will be closely watched, as they could indicate the future direction of monetary policy. Some experts suggest that the repo rate could fall to 5% later in the cycle, depending on evolving inflation trends and overall economic growth.

The upcoming MPC meeting is therefore considered a key event for businesses, investors, and households, as it will provide guidance on the RBI’s stance on lending rates, economic growth, and measures to manage inflation.

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