The moment has arrived to roll back the rise in repo rate that RBI initiated following Covid-19. This has been indicated by an SBI report.
Average person will certainly experience some relief
The ecowrap report from SBI indicates that the Reserve Bank of India (RBI) has the potential to reduce the repo rate by 75 basis points this year. 75 basis points signifies a decrease in interest rates of 0.75 percent. This may not reach the pre-Covid-19 level, but the average person will certainly experience some relief from this. The decline in inflation within the nation has raised the likelihood of interest rate cuts this year.
CPI inflation dropped to 3.6% in February 2025
The SBI Research Ecowrap report suggests that the RBI may reduce the repo rate by 75 basis points (0.75%) in the fiscal year 2024-25. Two successive cuts might occur in April and June 2025, with another rate cut likely in October 2025. CPI inflation dropped to 3.6% in February 2025, marking a seven-month low. There was a sense of relief mainly attributed to the decline in vegetable prices, whereas fruit prices rose due to fasting and the Maha Kumbh Mela. The report predicts that inflation could be 3.9% in the fourth quarter, with an overall average of 4.7% for the whole financial year.
Industrial output (IIP) increased by 5% in January 2025, with notable contributions from the manufacturing and mining industries. Likewise, Indian firms demonstrated resilience, with the total revenue of approximately 4,000 listed enterprises increasing by 6.2% in the third quarter, while earnings rose by 12%. The Indian economy appears stable because of low inflation, potential interest rate reductions, and robust corporate earnings. Nonetheless, it will be crucial to monitor worldwide economic instabilities and increasing imported inflation. A reduction in interest rates will be advantageous for the real estate, automotive, and consumer goods sectors.