Dr Duvvuri Subbarao describes the just announced move by the Reserve Bank of India (RBI) as “the appropriate response to the current macro situation as well as to the government’s fiscal stance.” On his reading of the announcement by the central bank to reduce the policy repo rate by 25 basis points from 6.50 per cent to 6.25 per cent, Subbarao, the economist and former governor of the Reserve Bank of India says, “The fiscal responsibility displayed by the government has given room for the RBI to cut the rate. Also, since the inflation rate seems to be getting under control and the growth is slowing, the measures announced were appropriate.”
Albeit, he feels, the strengthening of dollar against the rupee could be the only challenge and there are reasons to believe that the dollar is likely to remain strong for some time at least. “It is not really the rupee falling but it is the dollar strengthening and this could have complicated the matter, going by the developments over the last two weeks though all of these would have been taken into consideration” by the monetary policy committee, he says.
On the inflation rate, Sanjay Malhotra, the RBI governor, in his just announced statement had said, “the consumer price index (CPI) inflation for the current financial year has been projected at 4.8 per cent with Q4 at 4.4 per cent.”
Assuming a normal monsoon, the RBI governor said the “CPI inflation for the financial year 2025-26 is projected at 4.2 per cent with Q1 at 4.5 per cent; Q2 at 4.0 per cent; Q3 at 3.8 per cent; and Q4 at 4.2 per cent.”