Two members of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), Nagesh Kumar and Ram Singh, called for a 25 basis point reduction in the repo rate to 6.25%, citing concerns over India’s slowing economic growth and softening inflation, the December MPC minutes showed.
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The call comes as the MPC voted to maintain the policy rate at 6.50% for the 11th consecutive time, while continuing its neutral stance.
Kumar’s argument for a rate cut revolves around the significant slowdown in India’s economic growth, which fell sharply from 8.2% in FY23 to just 5.4% in Q2 2024-25. He stated that the slowdown was largely driven by weakness in the industrial sector, with diminished consumption and investment, highlighting the need for policy intervention.
“A rate cut would help in stimulating investments, demand, and growth, without worsening inflation,” he said.
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Singh echoed similar sentiments, stressing the need for a shift to a more growth-supportive monetary policy. He pointed out that a rate cut would lower the cost of doing business and make holding cash less attractive for firms. He further noted that a rate cut aligns with the international trend, as many central banks in developed markets have already reduced their benchmark interest rates.
Both members also proposed exploring non-rate measures, such as a reduction in the cash reserve ratio (CRR), to enhance liquidity and boost lending.
The RBI’s recent policy action saw the CRR cut to 4% from 4.5%, releasing ₹1.16 lakh crore into the banking system. However, the call for a rate cut remains a point of contention, with the majority of the MPC preferring to wait for clearer signs of inflationary pressure before adjusting the rate.
(Edited by : Shoma Bhattacharjee)
