India's repo rate, which influences borrowing costs across the economy, was kept at 6.5 percent for the fifth consecutive meeting. Governor Shaktikanta Das emphasized that the bank remains vigilant against inflationary risks, noting the need for a calibrated stance amid global economic uncertainties and domestic structural adjustments. While this pause aligns with market expectations, the reduction in the growth forecast to 6.6 percent from the earlier projection reflects concern over persistent challenges to demand recovery and private investment.
The unchanged lending rate demonstrates the RBI’s commitment to anchoring inflationary expectations without stifling growth. This decision comes against the backdrop of a gradual moderation in price pressures but lingering supply chain disruptions and elevated commodity prices. Consumer price index inflation eased to a nine-month low in October, driven primarily by declining vegetable prices and slower increases in fuel costs. However, the central bank remains wary of potential risks posed by volatile global oil markets and uncertain monsoon outcomes.
The growth outlook revision has been attributed to weaker-than-expected industrial output and slowing global demand. The bank anticipates that private consumption, which has been a key growth driver in the post-pandemic recovery, might taper off due to inflationary pressures on household budgets. Furthermore, export growth has softened amid global economic headwinds, adding to concerns over the external sector's performance.
The central bank reaffirmed its commitment to its medium-term inflation target of 4 percent, with a tolerance band of 2 percent on either side. Governor Das reiterated the importance of price stability as a precondition for sustained economic growth and highlighted the need for structural reforms to boost productivity and competitiveness.
While the RBI's decision to hold rates provides relief to borrowers, especially in the housing and retail segments, experts warn that the impact on credit growth may remain subdued. Non-banking financial institutions have expressed concerns about rising delinquency rates in the small and medium enterprise sector, suggesting the need for targeted policy interventions to address liquidity constraints.
The global economic environment has also influenced the central bank's cautious stance. Persistent tightening by major central banks, particularly the U.S. Federal Reserve, has heightened risks of capital outflows from emerging markets, including India. The RBI has intervened in the foreign exchange market to stabilize the rupee, which has witnessed periodic depreciation against the dollar. Governor Das reassured stakeholders that the central bank stands ready to act to ensure financial stability.
Domestic equity markets responded positively to the rate decision, with key indices posting modest gains. Analysts noted that the pause in rate hikes would support corporate earnings and facilitate investment sentiment. However, they also cautioned that the growth forecast downgrade could weigh on investor confidence in the medium term.
Meanwhile, industry leaders have called for more fiscal measures to complement the RBI's monetary policy. They argue that higher public spending on infrastructure and social welfare programs could provide the necessary impetus to revive economic momentum. The central bank, for its part, has encouraged banks to focus on credit deployment in critical sectors such as agriculture, renewable energy, and technology.