The 100 basis point repo rate cut, since February 2025, is expected to positively impact both economic growth and the inflation outlook.....

 The Reserve Bank of India's (RBI) recent 100 basis point repo rate reduction, since February 2025, alongside easing inflation, is projected to stimulate economic growth and potentially reduce unemployment. While the inflation outlook remains positive, with a lowered projection to 3.7%, global trade tensions and geopolitical uncertainties pose potential challenges.

Inflation Outlook:

The RBI has revised its inflation forecast for 2025-26 to 3.7%, down from 4% previously.

CPI inflation has declined to a near six-year low of 3.2% in April 2025, driven by falling food prices and a general softening of prices.

The RBI expects inflation to remain within the 4% tolerance band.

Economic Growth:

The RBI projects a 6.5% real GDP growth for 2025-26, supported by rising private consumption, healthy balance sheets, and government spending.

India's economy has shown resilience, with GDP growth reaching 7.4% in the quarter ending January-March 2025.

The repo rate cut aims to further boost growth by lowering borrowing costs.

Unemployment:

The repo rate cut is expected to stimulate economic activity, potentially leading to job creation and a decrease in unemployment.

Increased private investment, consumption, and government spending are expected to contribute to this positive trend.

However, the impact on unemployment will depend on the overall health of the economy and the specific sectors experiencing growth.

Potential Challenges:

Geopolitical tensions and global trade disruptions could pose challenges to the Indian economy.

While the RBI expects inflation to remain under control, the possibility of rising food or fuel prices remains a concern.

The effectiveness of the repo rate cut in stimulating growth will depend on the transmission of monetary policy to the credit market.

In summary, the 100 basis point repo rate cut is expected to positively impact both economic growth and the inflation outlook. While the outlook for unemployment is generally positive, challenges related to global uncertainties and the potential for rising inflation remain.