Following the tax relief announcements made by Finance Minister Nirmala Sitharaman in the 2025 Budget, the middle class is now turning its attention to the Reserve Bank of India’s upcoming monetary policy meeting on February 7. This meeting, which is the final one of the financial year 2024, is expected to play a significant role in shaping the stock market’s direction, with many anticipating an important decision regarding interest rates.
Anticipations After the Budget: A Possible Interest Rate Cut
The Budget 2024 introduced major tax exemptions, particularly making income up to Rs 12 lakh tax-free, which was a significant relief for many. Following this, the focus now shifts to the RBI’s policy stance, with many speculating that the central bank may reduce interest rates. The RBI’s decision will be keenly watched, as it could help lower borrowing costs and reduce the EMI burden on the middle class.
Given the inflation data from December, there are strong expectations that the RBI will consider a rate cut during its meeting. If implemented, a reduction in interest rates would ease the financial pressures on individuals and businesses alike. Analysts are predicting a 25 basis points (bps) cut, which would mark the first interest rate reduction in four years.
Economic Analysis and Expert Views
According to the Economic Survey 2025, inflation is expected to gradually decrease to the 4 percent level, despite global uncertainties. The survey also highlights that economic growth will likely remain stable, but stresses the importance of continued government support to maintain momentum.
Rahul Bajoria, the India and ASEAN Economist at Bofas India, believes that both the current inflation trends and growth figures indicate the need for the RBI to ease monetary policy. He emphasizes that reducing rates could further support economic activity.
Garima Kapoor, an economist at Elara Securities, also predicts a 25 bps cut in the policy repo rate. This potential decision aligns with the broader economic outlook that favors loosening monetary conditions to sustain growth.
Sanjay Malhotra’s First Policy Meeting as RBI Governor
This upcoming meeting will hold added significance as it marks the first monetary policy review led by Sanjay Malhotra, who succeeded Shaktikanta Das as the new RBI Governor in December 2024. The market is eager to see how his leadership will shape the RBI’s decisions moving forward, particularly regarding interest rates.
As the February 7 meeting draws near, all eyes will be on the RBI to see if it responds to current economic trends with a rate cut, which could provide much-needed relief to borrowers and positively impact the economy.