RBI’s Policy Pivot Set To Boost Economy Without Fanning Inflation, Say Experts

Experts anticipate cumulative cuts of up to 100 basis points by 2025, with the move expected to stimulate economic growth, revive housing demand, and ease borrowing costs. While no major liquidity injections are anticipated immediately, the RBI’s calibrated approach—supported by fiscal measures—signals a pro-growth stance without compromising inflation stability

The Reserve Bank of India’s proactive approach to monetary policy, combined with fiscal support measures such as tax cuts and increased capital expenditure, is expected to boost economic growth without exacerbating inflation. Bizz Buzz interacted with a host of stakeholders to elicit their opinion on the topic.

Soumya Kanti Ghosh, Member, 16th Finance Commission & Group Chief Economic Adviser, Research Department, State Bank of India said, “We expect a 25-basis point rate cut in April policy. Cumulative rate cut over the cycle could be at least 100 basis points, with 2 successive rate cuts over February and April 2025.”

With an intervening gap in June’2025, the second round of rate cuts could start from August, he said.

Icra expects the MPC to cut rates by 25 bps in its meeting, while maintaining a neutral stance. While the Central Bank’s liquidity interventions are likely to continue with the target of offsetting the upcoming drain arising from the unwinding of the short positions in its forward book and the maturity of long tenor VRRs, we do not expect any major announcements around liquidity injections such as a CRR cut in the MPC meeting. The recent announcements of liquidity injections are likely intended to nudge a faster transmission of rates.

Housing demand is set to get a significant boost in FY26 as RBI is expected to cut the repo rate, making home loans more affordable.

The Monetary Policy Committee started its meeting on April 7 to conclude on 9, to assess the current economic landscape and determine the direction of interest rates. The RBI is anticipated to reduce the repo rate by 25 basis points, bringing it down to 6 per cent, in the upcoming Monetary Policy Committee (MPC) meeting.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution says, “We anticipate further rate cuts in the upcoming RBI monetary policy review in April, given the continued decline in inflation and improved liquidity conditions.”

For instance, if someone is planning to take a home loan of Rs 75 lakh at an interest rate of 9 per cent for a tenure of 20 years, their current EMI would be approximately Rs 67,493. However, if the interest rate drops by 0.75 per cent (from 9 per cent to 8.25 per cent), their EMI will reduce to approximately Rs 63,901. This results in a monthly savings of about Rs 3,592 and a total savings of nearly Rs 8.62 lakh over the loan tenure.

Additionally, lower interest rates enhance loan eligibility. For the same EMI of Rs 67,493, the loan amount that a borrower could avail at 8.25 per cent interest (instead of 9 per cent) would increase to approximately Rs 79.2 lakh. This means a potential homebuyer can now afford a property priced higher than before, further stimulating demand in the housing sector.

Housing sales and supply, which saw a decline in the first quarter, will get a fillip with cheaper borrowings. This will also help in enhancing home loan eligibility for prospective borrowers.