RBI cuts repo rate, raises GDP, lowers inflation – Ajay Bagga calls it ‘pragmatic & courageous’

The Reserve Bank of India’s (RBI) bi-monthly monetary policy announcement on December 5 has drawn positive reactions from market experts, with veteran Ajay Bagga calling it fully in line with expectations.

The Monetary Policy Committee (MPC) reduced the policy repo rate by 25 basis points, bringing it to 5.25 per cent, extending the total rate cut since February to 100 basis points.

Ajay Bagga Reacts

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Bagga described the policy as “5/5” for being pragmatic and data-driven. He highlighted three key aspects: the repo rate cut, a higher GDP projection, and a downward revision of inflation estimates.

The RBI now projects FY26 real GDP growth at 7.3 per cent, up from its earlier estimate of 6.8 per cent, while consumer price index (CPI) inflation is expected at 2 per cent, lower than the earlier 2.6 per cent.

“CPI inflation in October would have been negative if gold and silver prices were excluded,” Bagga noted, calling the RBI’s approach “courageous.”

He emphasised that the central bank’s decisions are firmly based on domestic economic conditions, showing confidence in India’s macro fundamentals and growth trajectory.

Bagga also pointed to the importance of stimulus in the current environment. “Given slower-than-expected tax revenue, the RBI acted decisively to support the economy,” he said.

RBI OMO Purchases

He praised the combination of measures announced, including liquidity support through Rs 1 lakh crore of Open Market Operation (OMO) purchases and a $5 billion three-year dollar–rupee buy–sell swap, as well as the neutral policy stance, for being comprehensive and growth-friendly.

On the question of whether another rate cut is likely, Bagga sees potential in February. He explained that the RBI has signalled easing based on domestic factors and that low inflation levels should give the central bank confidence to consider further cuts.

Overall, Bagga views the policy as a well-balanced mix of growth support and inflation management. “The commentary is dovish, decisions are data-dependent, and the policy is both pragmatic and courageous,” he said.

He added that the RBI has provided a clear signal that it is ready to support the economy while carefully managing risks from external uncertainty and currency volatility.