The government has taken big measures to increase growth, now the eyes are on Sanjay Malhotra. Will the new Governor of RBI announce to reduce the interest rate in monetary policy on 7 February?

Recently, there have been signs of lethargy in the growth of the Indian economy. In the second quarter of FY 2024-25, GDP growth has come down to 5.4%, mainly due to decrease in consumption. Economists had advised the government to take big steps to increase consumption, resulting in Finance Minister Nirmala Sitharaman given significant relief in income tax on 1 February. This will save more money for spending in people’s hands, which will promote consumption.

Home loan will be cheaper due to reduced interest rate

If RBI Governor Sanjay Malhotra reduces the interest rate, it will support the growth of the economy. Decreased repo rate will have two major effects:

1. Reduction in EMI of Home Loan: This will save more money in the hands of the borrowers, which will help increase consumption.
2. Reduction in home loan interest rates: Banks will cut home loan interest rates, which will increase people’s interest in buying houses. Its direct benefit will be to the real estate sector, which will also be helpful in increasing sales of steel, cement, paints, and electrical companies. In addition, real estate sector is leading to creating new employment opportunities.

New Governor Sanjay Malhotra’s first credit policy

The RBI will introduce its first monetary policy on 7 February 2025, which will also be the first monetary policy of the new Governor Sanjay Malhotra. Earlier in December, former Governor Shaktikanta Das presented the monetary policy, after which he retired. If Malhotra reduces the repo rate, it will be the first time in the last five years. Most experts believe that Malhotra may reduce the repo rate by 0.25%.

RBI has not reduced interest rate in the last 5 years

The RBI did not reduce the interest rate in 2024, while in the US, the Federal Reserve was expected to reduce rates in India as well. However, former Governor Shaktikanta Das had clarified that he would decide about the interest rate according to the needs of the Indian economy. He also said that his focus is on controlling retail inflation.

RBI’s focus has been on controlling inflation

RBI has targeted 4% for retail inflation. Retail inflation has seen a decrease in the last few months. In such a situation, it is believed that the RBI may announce a decrease in interest rate on 7 February. This year, there may be a decrease in interest rate more than once, which will promote the growth of the economy.