Macroeconomic data suggests there is scope for repo rate cut: RBI Governor

“At the October meeting of the Monetary Policy Committee (MPC), it was indicated that there is a scope for a further rate cut in the (monetary) policy. None of the macro indicators, including inflation, released after that (post October MPC meeting), suggest that the scope (for rate cut) has reduced. So, there is definitely a scope (for a rate cut), but MPC will decide on it in the upcoming meeting,” Malhotra said in an interview with Zee Business.

India’s headline inflation, as measured by the Consumer Price Index (CPI), fell to a record low of 0.25 per cent in October, compared to 1.44 per cent in September.

During the current easing cycle, the MPC has reduced the repo rate by 100 basis points (bps) between February and June 2025. After keeping the repo rate steady at 5.5 per cent in August and October policy, economists expect the MPC to reduce the repo rate by 25 bps in December.

In response to a question on whether there will be aggressive rate cuts going ahead, the Governor said, “The primary mandate of the RBI is price stability, and the secondary objective is growth. We are neither aggressive nor defensive. We are like an all-rounder, but an all-rounder who first focuses on bowling or defence, and hits fours and sixes, if required. We do batting and bowling, but bowling, which is equivalent to price stability, is our priority.”

When asked about the rupee level that the RBI is comfortable with, Malhotra said, “Historically, the rupee has depreciated by 3-3.5 per cent on an annual basis. Our effort is that the rupee’s movement remains smooth.”

On possible stress in the MSME segment, he said that asset quality in the sector remains satisfactory and hoped that this trend would continue.