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RBI Drives Growth: 2025 Sees Aggressive Rate Cuts
23 Dec
Summary
- RBI slashed interest rates four times in 2025, a first in six years.
- India's GDP expanded over 8% amid record-low inflation below 1%.
- Governor Malhotra guided a decisive shift towards economic growth.
The Reserve Bank of India (RBI) concluded 2025 with a significant pro-growth shift, executing four interest rate cuts that reduced the repo rate from 6.50% to 5.25%. This cumulative reduction of 125 basis points marks the central bank's most aggressive move towards stimulating the economy in six years, signaling a departure from prior policies under Governor Sanjay Malhotra.
This pivot coincided with favorable economic conditions, including record-low inflation hitting 0.25% in October and strong GDP expansion surpassing 8% in the July-September quarter. Despite external risks like US tariffs, India's economy demonstrated resilience, though currency pressures saw the rupee fall to record lows before recovering slightly.
Governor Malhotra's tenure has been characterized by a more growth-friendly approach. The Monetary Policy Committee's unanimous decision in April initiated the rate cuts, with subsequent reductions in June (a larger 50 basis points cut) and December, alongside pauses in August and October to assess economic impacts. The bank maintained a watchful stance, prioritizing data-dependent policy adjustments amidst global uncertainties.
