RBI's bold rate cut signals growth focus as Budget nears

Reserve Bank of India (RBI) delivered an unexpectedly "strong, aggressive and forward-looking" monetary policy on Friday, cutting the repo rate by 25 basis points (bps) to 5.25 per cent despite the recent upside surprise in GDP data. The MPC voted unanimously for the reduction and supplemented it with liquidity support via a Rs 1 lakh crore OMO purchase and a $5-billion rupee-dollar swap over three years. Advertisement

Aditi Nayar, Chief Economist at ICRA, told Business Today that the cut came even though markets were broadly expecting a pause after the GDP print. She highlighted Governor Sanjay Malhotra's assertion that "benign inflation is allowing us to remain growth supportive," noting that inflation projections have been revised down to 2 per cent while growth forecasts were raise