RBI’s December Rate Cut Signals a Calibrated Push for Growth as Liquidity Measures Deepen

India’s monetary landscape shifted again this week as the RBI delivered another rate cut, trimming the policy repo rate by 25 basis points to 5.25%. This move, combined with a coordinated set of liquidity injections through bond purchases and a large FX swap, underscores the central bank’s renewed focus on maintaining growth momentum amid stable inflation.

The RBI has leaned into its easing cycle throughout the year, citing a favourable blend of resilient GDP growth, cooling inflation, and a stable financial system. The December rate cut fits neatly within this narrative: pricing pressures have softened enough to give policymakers maneuvering room, even as global conditions remain somewhat fragile.

With domestic demand holding firm and government spending supportive, the central bank appears intent on preventing any loss of economic traction. The latest policy stance suggests the RBI views inflation risks as largely contained—though not entirely erased—allowing a more confident push toward pro-growth settings.