MACROECONOMICS

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CBS LINE

Volume 3(10)

RBI Maintains Repo Rate at 5.5%, Signals Confidence in India’s Economic Stability

On October 2025, the Reserve Bank of India (RBI) decided to keep the repo rate unchanged at 5.5% during its Monetary Policy Committee (MPC) meeting. This decision reflected a balance between supporting economic growth and keeping inflation under control. The RBI also revised its inflation forecast for the financial year 2025–26, lowering it from 3.1% to 2.6%, showing confidence in the country’s stable price situation. Consumer Price Index (CPI) inflation had reached an eight-year low of 1.6% in July 2025, mainly due to falling food prices and stable fuel costs.

The RBI’s decision has significant implications for the Indian economy. By maintaining the repo rate, the central bank ensured that borrowing costs for businesses and consumers remained stable, encouraging investment and consumption. Lower inflation provides relief to households, as essential goods and services become more affordable. Additionally, steady prices and controlled inflation strengthen purchasing power and consumer confidence, both of which are vital for sustained economic growth.

On the fiscal side, rationalisation of GST rates in September 2025 simplified taxes and reduced consumer prices, supporting the government’s goal of creating a more efficient tax system. This move directly benefited around 11.4% of the CPI basket, easing the cost of living and supporting domestic demand. Moreover, India’s current account deficit narrowed to 0.2% of GDP in the first quarter of FY 2025–26 from 0.9% a year earlier, driven by strong exports, services, and remittances.

Overall, the RBI’s policy stance and the government’s fiscal measures demonstrate a coordinated effort to maintain economic stability. The combination of low inflation, stable interest rates, and a narrowing trade deficit strengthens India’s macroeconomic fundamentals. These developments not only boost investor confidence but also lay a strong foundation for sustainable and inclusive growth in the coming years.


Joshna Jose

Econometrics and Financial Technology


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