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Key Points

The RBI has wisely decided to keep the repo rate steady at 5.5% given all the global turmoil happening right now. With conflicts in the Middle East and ongoing Russia-Ukraine tensions, economists agree this cautious approach makes perfect sense. India's economy is still growing strong at 6.5% while inflation remains manageable around 3.7%. The RBI Governor also highlighted how good monsoon rains and GST reforms are helping boost consumption and keep the economy humming along nicely.

Key Points: RBI Holds Repo Rate at 5.5% Amid Global Uncertainty Says Economist

  • RBI maintains repo rate at 5.5% for second consecutive meeting amid global economic uncertainty
  • Economist cites Israel-Hamas conflict and Russia-Ukraine war as key factors
  • India's growth projected at 6.5% with manageable 3.7% inflation forecast
  • RBI Governor notes robust economy performance with favorable monsoon easing inflation
  • Monetary policy decisions separate from GST reforms which support consumption growth
2 min read

RBI's move to hold repo rate at 5.5 per cent prudent amid global uncertainty: Economist

Economist Dr Manoranjan Sharma calls RBI's rate pause prudent given Middle East conflict, Russia-Ukraine war, and volatile crude oil prices affecting global economy.

RBI's move to hold repo rate at 5.5 per cent prudent amid global uncertainty: Economist
"Crude oil prices remain volatile, and the country's growth rate is at 6.5 per cent. In such a situation, the RBI's decision is well-judged - Dr Manoranjan Sharma"

New Delhi, Oct 1

The Reserve Bank of India’s (RBI) decision to maintain the repo rate at 5.5 per cent was "appropriate" and "prudent", given the prevailing global economic uncertainty, economist Dr Manoranjan Sharma said on Wednesday.

Speaking to IANS, Dr Sharma noted that most economists had anticipated no change in the October monetary policy, considering the ongoing Israel-Hamas conflict in the Middle East, the prolonged Russia-Ukraine war, and the impact of US tariffs.

"Crude oil prices remain volatile, and the country’s growth rate is at 6.5 per cent. In such a situation, the RBI’s decision is well-judged," he noted.

Dr Sharma also underlined that the RBI’s monetary policy decisions are not directly linked to GST. "Interest rates are set by the central bank based on broader economic conditions. GST is a structural reform that will help boost consumption and support growth," he added.

The economist projected that India’s inflation will hover around 3.7 per cent in the current financial year, which he said is manageable, given India’s position as the world’s fastest-growing economy.

As per the policy announcement, the RBI has kept the repo rate unchanged at 5.50 per cent and retained its monetary policy stance as “neutral”. The Standing Deposit Facility (SDF) has been maintained at 5.25 per cent, while the Marginal Standing Facility (MSF) remains at 5.75 per cent.

RBI Governor Sanjay Malhotra, in his policy address, highlighted that the economy is performing robustly, with inflation easing due to a favourable monsoon. He also pointed out that GST rate reductions have supported consumption and accelerated growth.

This is the second consecutive time that the RBI has left the repo rate unchanged, after maintaining the status quo in the August MPC meeting. Since the beginning of 2025, however, the central bank has lowered the repo rate by a total of 1 percentage point - cutting it by 25 basis points each in February and April, followed by a larger 50 basis points cut in June.

- IANS

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Reader Comments

R
Rohit P
As a small business owner, I was hoping for a rate cut to get cheaper loans. But I understand RBI's caution given the global situation. Let's hope things stabilize soon.
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Aditya G
Good move by RBI! The economy needs stability right now with all the global uncertainties. Dr Sharma's analysis makes perfect sense - better safe than sorry when dealing with volatile crude prices.
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Sarah B
While I appreciate the cautious approach, I wish RBI would be more proactive in supporting growth. Many middle-class families are struggling with high EMIs. A small cut would have helped.
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Karthik V
Excellent decision! With India growing at 6.5% and inflation projected around 3.7%, this stability will boost investor confidence. Jai Hind! 🚀
M
Meera T
As someone planning to buy a home, I'm disappointed but understand the reasoning. The good monsoon helping control inflation is a silver lining. Maybe next time!

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