RBI should have gone for a deeper rate cut, say economists and industry leaders

While the move to bring the key policy rate down to 6 per cent and the shift in stance from "neutral" to "accommodative" was largely in line with expectations, several economists and industry leaders believe a more aggressive approach was warranted amid benign inflation and sluggish growth indicators.

Jyoti Prakash Gadia, Managing Director at Resurgent India, said a more expansionary stance could have been adopted.

"Considering the controlled level of inflation, expected normal monsoon and comparative sluggish growth trends, a higher rate cut of 50 basis points could have been considered by RBI which would have paved the way for creating a more enabling environment for a higher growth trajectory," he said.

The view was also echoed by Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, who pointed to the growing external risks to India's economy.

"We note the increasing global turmoil and its spillovers to the Indian growth slowdown will necessitate the MPC for deeper rate cuts. We see scope for additional 75-100bp of rate cuts in the year ahead depending on the scale of global slowdown," she said.

Chandrajit Banerjee, Director General of CII, stressed the urgency of lowering real interest rates further to revive investment demand.

"The RBI's rate cut, and stance change reflect concerns about the impact of slower global growth on domestic economic growth and a relatively benign outlook for domestic inflation. Moreover, with real interest rates being still high at 2.6 per cent after the rate cut in February, there was an urgent need for the rates to come down further to boost investment demand," he noted.

From the real estate sector, Boman Irani, President of CREDAI National, welcomed the rate cut, calling it timely. "It is likely to improve home loan affordability, stimulate housing demand, and provide a strong impetus to the mid-income and affordable segments, where interest rate sensitivity remains high. The RBI's continued policy easing highlights its commitment to sustaining growth while safeguarding macroeconomic stability."

Adding to the chorus, Manoranjan Sharma, Chief Economist at Infomerics Valuation and Ratings, highlighted the positive impact on borrowers.

"As a consequence of this measure, all external benchmark lending rates would fall by 25 bps, thereby providing a welcome relief to the borrowers in the interest rate sensitive segments, viz., housing loans, auto loans, education loans and other personal loans. In a future guidance measure, the Monetary Policy stance was shifted from "neutral" to "accommodative".," he said.

He also signaled expectations of further easing, saying, "We see a Repo Rate reduction of 75-100 bps in FY26."

The RBI's measured approach appears to have set the stage for further easing, but voices across sectors are calling for quicker and bolder moves to fuel India's growth engine.