RBI's move to hold repo rate at 5.5 per cent prudent amid global uncertainty: Economist

New Delhi, Oct 1 (IANS) The Reserve Bank of India’s (RBI) decision to maintain the repo rate at 5.5 per cent was "appropriate" and "prudent", given the prevailing global economic uncertainty, economist Dr Manoranjan Sharma said on Wednesday.

Speaking to IANS, Dr Sharma noted that most economists had anticipated no change in the October monetary policy, considering the ongoing Israel-Hamas conflict in the Middle East, the prolonged Russia-Ukraine war, and the impact of US tariffs.

"Crude oil prices remain volatile, and the country’s growth rate is at 6.5 per cent. In such a situation, the RBI’s decision is well-judged," he noted.

Dr Sharma also underlined that the RBI’s monetary policy decisions are not directly linked to GST. "Interest rates are set by the central bank based on broader economic conditions. GST is a structural reform that will help boost consumption and support growth," he added.

The economist projected that India’s inflation will hover around 3.7 per cent in the current financial year, which he said is manageable, given India’s position as the world’s fastest-growing economy.

As per the policy announcement, the RBI has kept the repo rate unchanged at 5.50 per cent and retained its monetary policy stance as “neutral”. The Standing Deposit Facility (SDF) has been maintained at 5.25 per cent, while the Marginal Standing Facility (MSF) remains at 5.75 per cent.

RBI Governor Sanjay Malhotra, in his policy address, highlighted that the economy is performing robustly, with inflation easing due to a favourable monsoon. He also pointed out that GST rate reductions have supported consumption and accelerated growth.

This is the second consecutive time that the RBI has left the repo rate unchanged, after maintaining the status quo in the August MPC meeting. Since the beginning of 2025, however, the central bank has lowered the repo rate by a total of 1 percentage point - cutting it by 25 basis points each in February and April, followed by a larger 50 basis points cut in June.

--IANS

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