RBI Rate Cut Debate: 25 bps or 50 bps? Economists Split Ahead of Policy Decision

As the Reserve Bank of India (RBI) gears up for its Monetary Policy Committee (MPC) meeting, economists remain divided on the quantum of the anticipated rate cut. While some advocate for a bold 50 basis point (bps) reduction to stimulate economic growth, others favor a cautious 25 bps cut, citing macroeconomic stability and external risks.

 

The debate stems from India’s evolving economic landscape, where retail inflation has moderated below 4%, and domestic growth remains robust. However, concerns over global monetary trends, monsoon impact on food prices, and capital flows continue to influence policy decisions.

 

Key Perspectives:

 

Pro-50 bps Cut: Economists like Debopam Chaudhuri argue that a larger-than-expected cut would accelerate rate transmission, boost credit cycles, and enhance India’s investment appeal, especially as the US Federal Reserve prepares to ease its policy stance.

 

Pro-25 bps Cut: Experts like Sonal Badhan suggest a more measured approach, emphasizing inflation control, monsoon stability, and foreign portfolio investment risks. A front-loaded 25 bps cut is seen as prudent, ensuring gradual economic adjustments.

With the MPC’s decision set for June 6, markets eagerly await RBI’s stance, which could shape India’s financial trajectory in the coming months.

 

Sources: Tribune India, Economic Times