Reserve Bank of India governor Sanjay Malhotra on Monday indicated that macroeconomic data since the October monetary policy review has not eroded the space available for further policy rate cuts. Malhotra, however, underscored that any decision to alter interest rates would rest with the Monetary Policy Committee (MPC).
In the October meeting, the MPC held policy rates steady but observed that prevailing economic conditions and the growth outlook had created room to support economic activity through future easing. The committee had cumulatively reduced the repo rate by 100 basis points in the first half of 2025 before shifting to a pause from August.
“In the last monetary policy committee meeting, it was clearly stated that there is room in the policy for further rate cuts. Since then, the macro-economic data have not indicated that the room to lower rates has decreased. But whether the MPC will decide to change rates or not, it is up to them,” Malhotra said in an interview with Zee Business.
Retail inflation dropped sharply to 0.25 per cent in October, hitting a record low. The fall was driven by GST cuts on nearly 380 mass-consumption items and subdued prices of vegetables, fruits and eggs. Inflation had stood at 1.44 per cent in September and 6.21 per cent in October 2024.
Releasing its October bulletin on Monday, the RBI reported that high-frequency indicators point to an expansion in both manufacturing and services, supported by festive demand and the ongoing positive impact of GST reforms. Inflation has cooled and remains well below the target, while financial conditions are benign. The central bank also noted a significant rise in the flow of financial resources to the commercial sector.
“Improved macroeconomic frameworks and outcomes have not only enhanced the ability of financial institutions to support the macroeconomy but also allowed the Reserve Bank to better calibrate regulatory measures, improve the efficiency of financial intermediation and augment the flow of credit to the broader economy,” the bulletin said.
It added that fiscal, monetary and regulatory steps taken so far this year should help trigger a virtuous cycle of higher private investment, productivity and growth, strengthening long-term economic resilience.
The six-member MPC, chaired by the RBI governor, is scheduled to meet on December 3–5 to decide the policy repo rate and assess inflation and growth dynamics.
Economists expect the central bank to revise its CPI projections and potentially announce a 25-basis-point rate cut.