Context
• RBI’s MPC cut the repo rate by 25 bps to 5.25%.
• Driven by strong GDP growth (8.2% in Q2) and sharp fall in inflation (1.7%).
• Indicates shift towards easing borrowing costs.
Reasons for Rate Cut
1. Inflation well below target
• Inflation down to 1.7%, below RBI’s 4% target.
• Allowed policy easing without risking stability.
2. Robust economic growth
• GDP at 8.2%, showing momentum.
• Rate cut to sustain growth and make loans cheaper.
