Move will help boost domestic demand, says Agarwal
The Federation of Indian Export Organisations (FIEO) has lauded the Reserve Bank of India’s (RBI) proactive decision to cut the repo rate by 50 basis points and reduce the Cash Reserve Ratio (CRR) by 100 basis points, calling it a well-calibrated step to stimulate economic activity while keeping inflation expectations anchored.
Stating this, FIEO President S C Ralhan added that the RBI’s twin measures come at a critical juncture when the Indian economy is navigating global headwinds and domestic demand is in a consolidation phase.
“These steps are expected to ease financing conditions, enhance liquidity in the banking system, and boost credit flow, particularly to sectors such as exports, manufacturing, and MSMEs,” he said.
“By reducing the repo rate by 50bps, the RBI has signalled a strong commitment to supporting growth while maintaining macroeconomic stability. The 100bps reduction in the CRR will immediately release additional liquidity into the system, which we hope banks will transmit effectively to borrowers, including exporters,” said Ralhan.
The head of exporters group also noted that the RBI’s actions are aligned with its objective of achieving the medium-term consumer price index (CPI) inflation target of 4%, within a tolerance band of +/- 2%, indicating that monetary easing is being pursued without compromising on price stability.
“With global demand still facing uncertainty and geopolitical tensions impacting trade flows, these measures will offer relief to Indian exporters, lower borrowing costs, and provide momentum to investment and consumption,” Ralhan continued.
Ralhan expressed confidence that the RBI’s forward-looking stance, supported by complementary fiscal measures, will reinforce the country’s economic resilience and help maintain India’s export competitiveness in a challenging global environment.
Also welcoming the RBI’s bold and proactive move to cut repo rate by 50 basis points on 6 June, FICCI President Harsha Vardhan Agarwal said, “FICCI welcomes RBI’s bold and proactive move to slash the repo rate by 50 basis points — a cut that was higher than market expectations. This frontloaded rate cut sends a strong signal of the RBI’s commitment to supporting growth, especially at a time when the Indian economy is navigating multiple headwinds — from trade uncertainties and geopolitical tensions to financial market volatility.”
The move is timely and will help boost domestic demand, encourage credit offtake, and inject further momentum into economic activity, he added.
“The RBI’s GDP growth projection of 6.5% along with a benign inflation outlook underscores the resilience of the Indian economy. It also reflects confidence in the fundamentals and the effectiveness of calibrated policy support,” stated Agarwal.
“The RBI has struck the right balance — prioritizing growth without compromising its inflation mandate, which is critical in the current global economic climate,” he emphasized.
The RBI Monetary Policy Committee (MPC) reduced the policy repo rate under the liquidity adjustment facility (LAF) by 50 basis points to 5.50% with immediate effect (6 June).
Consequently, the standing deposit facility (SDF) rate shall stand adjusted to 5.25% and the marginal standing facility (MSF) rate and the Bank Rate to 5.75%, said the RBI.
The RBI said it was imperative to continue to stimulate domestic private consumption and investment through policy levers to step up the growth momentum. This changed growth-inflation dynamics calls for not only continuing with the policy easing but also frontloading the rate cuts to support growth.
After having reduced the policy repo rate by 100 bps in quick succession since February 2025, under the current circumstances, monetary policy is left with very limited space to support growth, added RBI.
“Hence, the MPC also decided to change the stance from accommodative to neutral. From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy in order to strike the right growth-inflation balance,” said RBI.
“The fast-changing global economic situation too necessitates continuous monitoring and assessment of the evolving macroeconomic outlook,” stressed the central bank. Fiinews.com
