New Delhi, Dec 5 (UNI) India’s economic mood turned visibly brighter on Friday after the Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 5.25 per cent, signalling the beginning of a softer interest-rate phase after months of tight financial conditions.
The unanimous decision by the Monetary Policy Committee (MPC) came alongside stronger growth projections and inflation staying comfortably within the RBI’s expectations.
The central bank’s message was straightforward: domestic growth is holding firm, inflation has cooled and policy space is now available to support demand without risking financial stability.
With Gross Domestic Product (GDP) growth upgraded and inflation easing to 0.3 per cent in October, the RBI said it would continue with a neutral stance while ensuring liquidity remains comfortable.
The rupee, which has been under pressure recently, showed signs of stability after the policy announcement, touching 89.92 before closing at 89.98 against the dollar.
Bond yields also eased through the day, helped by the RBI’s plan to infuse liquidity through Rs 1 lakh crore of Open Market Operations (OMO) purchases and a USD 5 billion forex swap.
Even though rate cuts usually weigh on the rupee, analysts said Friday’s movement reflected growing confidence that India’s macro fundamentals remain strong, supported by solid foreign exchange reserves of USD 686.2 billion and steady domestic demand.
Interestingly, RBI Policy rates (like the repo rate) and the Rupee’s USD value have an inverse relationship: higher RBI rates attract foreign investment (capital inflows) and strengthen the Rupee.
On the flip side, lower rates boost domestic economic activity, but can weaken Rupee value.
Exporters welcomed the rate cut as an important step at a time when global demand is uneven, and financing costs remain high.
FIEO said the reduction would help exporters access cheaper working capital, manage cash flows better and invest more aggressively in technology and international markets—particularly useful for MSMEs facing tight liquidity.
Engineering exporters praised the move too, saying it would revive order flows and encourage long-term manufacturing investment.
Industry bodies stressed the need for quick transmission by banks so that the benefits reach small and mid-sized firms that are most sensitive to borrowing costs.
PHDCCI said the policy supports India’s growth momentum amid global uncertainties. While some early signs of moderation are visible in manufacturing indicators, the chamber noted that domestic fundamentals—banking system health, investment activity and foreign reserves—remain strong. It also welcomed the RBI’s focus on improving customer grievance redressal, saying it would improve ease of doing business.
RBI’s 25-bps repo rate cut lifts market mood; Rupee steadies as sectors cheer softer policy path
