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India Today
2 days ago
- Business
- India Today
How the RBI repo rate cut will impact you: Five key takeaways
RBI cuts repo rate by 50 basis points to 5% in third consecutive reduction CRR reduced by 100 basis points to inject Rs 2.5 lakh crore liquidity Inflation eases to 3.2% in April, projected at 3.7% for FY26 The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has reduced the repo rate, or the rate at which commercial banks borrow from the central bank, by 50 basis points (or 0.5 percentage point) to 5 per cent. The action: This is the third consecutive rate cut by the RBI, after having reduced the repo rate by 25 basis points each in the last two MPC meetings. Meanwhile, the cash reserve ratio (CRR), or the percentage of a bank's total deposits that they must hold in liquid form with the RBI as reserves, was reduced by 100 basis points. The reason: RBI governor Sanjay Malhotra said inflation has softened over the past six months to well within the RBI's tolerance band of 2-6 per cent. The inflation outlook for the year was revised downwards from the earlier forecast of 4 per cent to 3.7 per cent. However, growth has not been as expected. There was a need to boost private consumption and investment, and to facilitate that, it was necessary to ease rates as well as frontload the rate cuts, he said. With the latest rate cut, the RBI has cut 100 basis points (one percentage point) since this February. Inflation outlook: CPI (consumer price index) headline inflation continued its declining trajectory in March-April, moderating to a nearly six-year low of 3.2 per cent (year on year) in April 2025. This was led mainly by food inflation, which recorded the sixth consecutive monthly decline. The RBI has projected CPI inflation for FY26 at 3.7 per cent. Policy impact: With the frontloading of the rate cut, there will be more certainty in the market. Together with the CRR cut, it is expected to release much-needed liquidity into the economy. The RBI has also changed its monetary policy stance from 'accommodative' to 'neutral'. A Bank of Baroda (BoB) note says this implies there will possibly be no further cuts as the room for that is limited. Banks will have to reduce their interest rates in tandem with the RBI cuts, which should lead to better offtake of loans to buy homes and durables, among other goods, as well as industrial loans. Rajani Sinha, chief economist of CareEdge, said the CRR cut would inject around Rs 2.5 lakh crore in durable liquidity into the system, which would bolster credit growth and further facilitate smoother transmission of the policy rate cuts, thereby supporting overall economic growth. Niranjan Hiranandani, chairman of the Hiranandani Group, said the liquidity infusion of Rs 2.5 lakh crore is set to drive capex (capital expenditure) expansion, stimulate demand and catalyse growth across sectors. For the real-estate sector, this rate reduction is set to bolster credit lending, accelerate buying velocity, and enhance development momentum, he said. 'The resulting decline in home loan interest rates will directly benefit homebuyers by improving affordability and cushioning their financial commitments. Lower mortgage rates make home ownership more attainable, driving greater demand and fostering stronger sales indices,' said Hiranandani. He added that this move could spur refinancing activity and strengthen investment interest in branded properties known for their attractive returns, particularly among Grade A developers. Growth picture: The Centre has estimated that GDP growth would be 6.5 per cent in FY25. The RBI expects growth to be the same, at 6.5 per cent, in FY26, too. The factors driving this are a rise in discretionary spending, healthy rural demand, improvement in urban demand, a revival in investment activity, export growth and above normal monsoon. Services are growing too. However, geopolitical tensions and weather-related uncertainties continue to be a downside risk, says the BoB note, maintaining a growth forecast of 6.4 per cent to 6.6 per cent GDP growth in FY26. Subscribe to India Today Magazine The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has reduced the repo rate, or the rate at which commercial banks borrow from the central bank, by 50 basis points (or 0.5 percentage point) to 5 per cent. The action: This is the third consecutive rate cut by the RBI, after having reduced the repo rate by 25 basis points each in the last two MPC meetings. Meanwhile, the cash reserve ratio (CRR), or the percentage of a bank's total deposits that they must hold in liquid form with the RBI as reserves, was reduced by 100 basis points. The reason: RBI governor Sanjay Malhotra said inflation has softened over the past six months to well within the RBI's tolerance band of 2-6 per cent. The inflation outlook for the year was revised downwards from the earlier forecast of 4 per cent to 3.7 per cent. However, growth has not been as expected. There was a need to boost private consumption and investment, and to facilitate that, it was necessary to ease rates as well as frontload the rate cuts, he said. With the latest rate cut, the RBI has cut 100 basis points (one percentage point) since this February. Inflation outlook: CPI (consumer price index) headline inflation continued its declining trajectory in March-April, moderating to a nearly six-year low of 3.2 per cent (year on year) in April 2025. This was led mainly by food inflation, which recorded the sixth consecutive monthly decline. The RBI has projected CPI inflation for FY26 at 3.7 per cent. Policy impact: With the frontloading of the rate cut, there will be more certainty in the market. Together with the CRR cut, it is expected to release much-needed liquidity into the economy. The RBI has also changed its monetary policy stance from 'accommodative' to 'neutral'. A Bank of Baroda (BoB) note says this implies there will possibly be no further cuts as the room for that is limited. Banks will have to reduce their interest rates in tandem with the RBI cuts, which should lead to better offtake of loans to buy homes and durables, among other goods, as well as industrial loans. Rajani Sinha, chief economist of CareEdge, said the CRR cut would inject around Rs 2.5 lakh crore in durable liquidity into the system, which would bolster credit growth and further facilitate smoother transmission of the policy rate cuts, thereby supporting overall economic growth. Niranjan Hiranandani, chairman of the Hiranandani Group, said the liquidity infusion of Rs 2.5 lakh crore is set to drive capex (capital expenditure) expansion, stimulate demand and catalyse growth across sectors. For the real-estate sector, this rate reduction is set to bolster credit lending, accelerate buying velocity, and enhance development momentum, he said. 'The resulting decline in home loan interest rates will directly benefit homebuyers by improving affordability and cushioning their financial commitments. Lower mortgage rates make home ownership more attainable, driving greater demand and fostering stronger sales indices,' said Hiranandani. He added that this move could spur refinancing activity and strengthen investment interest in branded properties known for their attractive returns, particularly among Grade A developers. Growth picture: The Centre has estimated that GDP growth would be 6.5 per cent in FY25. The RBI expects growth to be the same, at 6.5 per cent, in FY26, too. The factors driving this are a rise in discretionary spending, healthy rural demand, improvement in urban demand, a revival in investment activity, export growth and above normal monsoon. Services are growing too. However, geopolitical tensions and weather-related uncertainties continue to be a downside risk, says the BoB note, maintaining a growth forecast of 6.4 per cent to 6.6 per cent GDP growth in FY26. Subscribe to India Today Magazine Join our WhatsApp Channel
Time of India
19-05-2025
- Business
- Time of India
India's March quarter GDP growth pegged at 6.8%: ET Poll
New Delhi: The Indian economy likely gained momentum in the fourth quarter of FY25, driven by strong agricultural output that lifted rural demand, according to an ET poll of economists. The survey pegged growth in FY25 at a median of 6.3%, lower than the government's 6.5% estimate in February and the 6.6% projection of the Reserve Bank of India (RBI). For the March quarter, the median forecast of 10 economists estimated gross domestic product (GDP) growth at 6.8% from the year earlier, with their numbers ranging from 6.2% to 7%. In the preceding December 2024 quarter, GDP growth was 6.2%. The median estimate for the January-March period is less than the RBI's forecast of 7.2%. Inventory stocking ahead of the threatened US tariffs also provided some push. The US has suspended the imposition of tariffs for 90 days to July. To be sure, the two countries are also negotiating a bilateral trade agreement, which could be unveiled in July. Not a full-blown recovery 'Economic activity in the fourth quarter is expected to remain resilient, supported by strategic frontloading of inventories by firms ahead of reciprocal tariff implementations and increased economic activity during the Maha Kumbh celebrations,' said Rajani Sinha, chief economist at CareEdge Ratings. The Maha Kumbh took place in Prayagraj from January 13 to February 26. 'Catch-up in government spending, consumption pick-up on easing inflation, stronger farm output and positive lead indicators on rural demand are expected to help growth trends,' said Radhika Rao, senior economist at DBS Bank. Lower inflation is seen bolstering real growth. 'The deflator will be a little more supportive as both wholesale and retail inflation eased, which will give little boost to real growth,' said Gaura Sengupta, chief economist at IDFC First Bank . On average, wholesale and retail inflation was at 2.3% and 3.7%, respectively, in the fourth quarter. That's down from 2.5% and 5.6% in the third quarter. The National Statistical Office (NSO) will release the official GDP figures for Q4 and provisional estimates for FY25 on May 30. Some high-frequency indicators suggest the recovery is still not full-blown — capital expenditure is lagging behind, urban demand is tepid, and corporate earnings are muted. 'While we expect an improvement from 3Q to 4QFY25, asharper rebound is restrained by a weak credit growth impulse, and tight financial conditions in that quarter,' said Rao. US tariff risks The US has said it will impose 26% duty on Indian goods. While this has been paused for 90 days until July 9, the baseline tariff of 10% remains in place. While rural demand is showing signs of recovery, urban consumption lags behind. 'Slowdown in real urban wage growth and reduction in savings buffer had an impact on urban consumption,' said Sengupta.
Time of India
19-05-2025
- Business
- Time of India
India's March quarter GDP growth pegged at 6.8%: ET Poll
New Delhi: The Indian economy likely gained momentum in the fourth quarter of FY25, driven by strong agricultural output that lifted rural demand, according to an ET poll of economists. The survey pegged growth in FY25 at a median of 6.3%, lower than the government's 6.5% estimate in February and the 6.6% projection of the Reserve Bank of India (RBI). For the March quarter, the median forecast of 10 economists estimated gross domestic product (GDP) growth at 6.8% from the year earlier, with their numbers ranging from 6.2% to 7%. In the preceding December 2024 quarter, GDP growth was 6.2%. The median estimate for the January-March period is less than the RBI's forecast of 7.2%. Inventory stocking ahead of the threatened US tariffs also provided some push. The US has suspended the imposition of tariffs for 90 days to July. To be sure, the two countries are also negotiating a bilateral trade agreement, which could be unveiled in July. GIF89a����!�,D; Continue to video 5 5 Next Stay Playback speed 1x Normal Back 0.25x 0.5x 1x Normal 1.5x 2x 5 5 / by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Average Cost To Rent A Private Jet May Surprise You (View Prices) Private Jet I Search Ads Learn More Undo ET Bureau Not a full-blown recovery 'Economic activity in the fourth quarter is expected to remain resilient, supported by strategic frontloading of inventories by firms ahead of reciprocal tariff implementations and increased economic activity during the Maha Kumbh celebrations,' said Rajani Sinha, chief economist at CareEdge Ratings. Live Events The Maha Kumbh took place in Prayagraj from January 13 to February 26. 'Catch-up in government spending, consumption pick-up on easing inflation, stronger farm output and positive lead indicators on rural demand are expected to help growth trends,' said Radhika Rao, senior economist at DBS Bank. Lower inflation is seen bolstering real growth. 'The deflator will be a little more supportive as both wholesale and retail inflation eased, which will give little boost to real growth,' said Gaura Sengupta, chief economist at IDFC First Bank . On average, wholesale and retail inflation was at 2.3% and 3.7%, respectively, in the fourth quarter. That's down from 2.5% and 5.6% in the third quarter. The National Statistical Office (NSO) will release the official GDP figures for Q4 and provisional estimates for FY25 on May 30. Some high-frequency indicators suggest the recovery is still not full-blown — capital expenditure is lagging behind, urban demand is tepid, and corporate earnings are muted. 'While we expect an improvement from 3Q to 4QFY25, asharper rebound is restrained by a weak credit growth impulse, and tight financial conditions in that quarter,' said Rao. US tariff risks The US has said it will impose 26% duty on Indian goods. While this has been paused for 90 days until July 9, the baseline tariff of 10% remains in place. While rural demand is showing signs of recovery, urban consumption lags behind. 'Slowdown in real urban wage growth and reduction in savings buffer had an impact on urban consumption,' said Sengupta.
Economic Times
19-05-2025
- Business
- Economic Times
India's March quarter GDP growth pegged at 6.8%: ET Poll
Economists predict India's Q4 FY25 GDP growth at 6.8%, fueled by strong agricultural output and rural demand, although slightly below RBI's forecast. Inventory stocking ahead of potential US tariffs also contributed. While rural consumption recovers, urban demand remains tepid due to slow wage growth and reduced savings, hindering a full-blown economic recovery. Tired of too many ads? Remove Ads Not a full-blown recovery Tired of too many ads? Remove Ads US tariff risks Tired of too many ads? Remove Ads New Delhi: The Indian economy likely gained momentum in the fourth quarter of FY25, driven by strong agricultural output that lifted rural demand, according to an ET poll of economists. The survey pegged growth in FY25 at a median of 6.3%, lower than the government's 6.5% estimate in February and the 6.6% projection of the Reserve Bank of India (RBI).For the March quarter, the median forecast of 10 economists estimated gross domestic product (GDP) growth at 6.8% from the year earlier, with their numbers ranging from 6.2% to 7%. In the preceding December 2024 quarter, GDP growth was 6.2%. The median estimate for the January-March period is less than the RBI's forecast of 7.2%.Inventory stocking ahead of the threatened US tariffs also provided some push. The US has suspended the imposition of tariffs for 90 days to July. To be sure, the two countries are also negotiating a bilateral trade agreement, which could be unveiled in July.'Economic activity in the fourth quarter is expected to remain resilient, supported by strategic frontloading of inventories by firms ahead of reciprocal tariff implementations and increased economic activity during the Maha Kumbh celebrations,' said Rajani Sinha, chief economist at CareEdge Maha Kumbh took place in Prayagraj from January 13 to February 26.'Catch-up in government spending, consumption pick-up on easing inflation, stronger farm output and positive lead indicators on rural demand are expected to help growth trends,' said Radhika Rao, senior economist at DBS inflation is seen bolstering real growth.'The deflator will be a little more supportive as both wholesale and retail inflation eased, which will give little boost to real growth,' said Gaura Sengupta, chief economist at IDFC First Bank On average, wholesale and retail inflation was at 2.3% and 3.7%, respectively, in the fourth quarter. That's down from 2.5% and 5.6% in the third National Statistical Office (NSO) will release the official GDP figures for Q4 and provisional estimates for FY25 on May high-frequency indicators suggest the recovery is still not full-blown — capital expenditure is lagging behind, urban demand is tepid, and corporate earnings are muted. 'While we expect an improvement from 3Q to 4QFY25, asharper rebound is restrained by a weak credit growth impulse, and tight financial conditions in that quarter,' said US has said it will impose 26% duty on Indian goods. While this has been paused for 90 days until July 9, the baseline tariff of 10% remains in rural demand is showing signs of recovery, urban consumption lags behind.'Slowdown in real urban wage growth and reduction in savings buffer had an impact on urban consumption,' said Sengupta.
Time of India
19-05-2025
- Business
- Time of India
India's March Quarter GDP Growth Pegged at 6.8%
The Indian economy likely gained momentum in the fourth quarter of FY25, driven by strong agricultural output that lifted rural demand, according to an ET poll of economists. The survey pegged growth in FY25 at a median of 6.3%, lower than the government's 6.5% estimate in February and the 6.6% projection of the Reserve Bank of India (RBI). For the March quarter, the median forecast of 10 economists estimated gross domestic product (GDP) growth at 6.8% from the year earlier, with their numbers ranging from 6.2% to 7%. In the preceding December 2024 quarter, GDP growth was 6.2%. The median estimate for the January-March period is less than the RBI's forecast of 7.2%. Inventory stocking ahead of the threatened US tariffs also provided some push. The US has suspended the imposition of tariffs for 90 days to July. To be sure, the two countries are also negotiating a bilateral trade agreement, which could be unveiled in July. 'Economic activity in the fourth quarter is expected to remain resilient, supported by strategic front-loading of inventories by firms ahead of reciprocal tariff implementations and increased economic activity during the Maha Kumbh celebrations,' said Rajani Sinha, chief economist at CareEdge Ratings. The Maha Kumbh took place in Prayagraj from January 13 to February 26. 'Catch-up in government spending, consumption pick-up on easing inflation, stronger farm output and positive lead indicators on rural demand are expected to help growth trends,' said Radhika Rao, senior economist at DBS Bank. Lower inflation is seen bolstering real growth. 'The deflator will be a little more supportive as both wholesale and retail inflation eased, which will give little boost to real growth,' said Gaura Sengupta, chief economist at IDFC First Bank. On average, wholesale and retail inflation was at 2.3% and 3.7%, respectively, in the fourth quarter. That's down from 2.5% and 5.6% in the third quarter. The National Statistical Office (NSO) will release the official GDP figures for Q4 and provisional estimates for FY25 on May 30. Some high-frequency indicators suggest the recovery is still not full-blown — capital expenditure is lagging behind, urban demand is tepid, and corporate earnings are muted. 'While we expect an improvement from 3Q to 4QFY25, a sharper rebound is restrained by a weak credit growth impulse, and tight financial conditions in that quarter,' said Rao. The US has said it will impose 26% duty on Indian goods. While this has been paused for 90 days until July 9, the baseline tariff of 10% remains in place. While rural demand is showing signs of recovery, urban consumption lags behind. 'Slowdown in real urban wage growth and reduction in savings buffer had an impact on urban consumption,' said Sengupta.
