RBI's Monetary Policy Decisions

The Reserve Bank of India recently held its Monetary Policy Committee meeting, deciding to maintain the repo rate at 6.5% while cutting the cash reserve ratio (CRR) by 50 basis points. This CRR reduction, which releases significant liquidity into the banking system, is a strategic move meant to support economic growth without exacerbating inflationary pressures. The RBI's choice reflects concerns about slowing growth, as India's GDP growth dropped to 5.4% in Q2, largely driven by weak private consumption and industrial performance. Despite these challenges, indicators suggest a potential recovery, driven by strong agricultural output and increased government spending, which influenced the decision to refrain from cutting the repo rate further to prevent inflating demand prematurely.