Notwithstanding the positive financial market spillovers, the RBI's hypera ccommodative strategy, while aimed at reviving growth, faces skepticism due to structural headwinds and sustained procyclical fiscal tightening.
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Dolat Capital Report
The Reserve Bank of India's policy measures since December 2024, including a 50 basis point repo rate cut to 5.50% and a 100 bp reduction in the Cash Reserve Ratio, signal a highly accommodative stance reminiscent of pandemic-era policies.
The cumulative liquidity infusion, estimated at Rs 13.16 trillion (5.7% of bank deposits), underscores deep concerns about India's growth outlook, despite the reported 7.4% GDP growth in Q4 FY25.
The RBI's frontloading of accommodative measures aims to stimulate household consumption and private capital expenditure (capex). However, the central bank has signaled limited scope for further easing, suggesting it has exhausted much of its monetary policy arsenal.
This urgency reflects skepticism about the sustainability of recent growth figures and a need to counter persistent demand weakness, partly driven by global economic slowdown.
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