SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation, and Infrastructure
Reserve Bank of India (RBI) | Ministry of Finance
The RBI Governor’s Statement on December 5, 2025, confirmed that the Indian economy is poised for high growth despite an unfavorable external environment, driven by robust domestic resilience and significant progress in controlling inflation.
Key Economic and Policy Decisions:
Monetary Policy Action: The Monetary Policy Committee (MPC) voted unanimously to reduce the policy repo rate by 25 basis points (bps) to 5.25 per cent with immediate effect. This decision reflects the MPC’s commitment to supporting growth momentum, given the benign inflation outlook.
Inflation Milestone: For the first time since the adoption of flexible inflation targeting (FIT), average headline inflation in Q2:2025-26 breached the lower tolerance threshold (2 per cent) of the 4 per cent target, hitting a mere 1.7 per cent. Inflation dipped further to an all-time low of 0.3 per cent in October 2025.
GDP and Growth: Real GDP growth accelerated to a six-quarter high of 8.2 per cent in Q2:2025-26. The first half (H1) presented a rare goldilocks period, with inflation at 2.2 per cent and growth at 8.0 per cent.
Banking System Strength: The financial system remains robust, with the Gross Non-Performing Assets (GNPA) ratio for Scheduled Commercial Banks (SCBs) continuing to decline. Total resources flowed to the commercial sector grew to ₹20.1 lakh crore in the current financial year.
Consumer Protection Drive: The RBI announced a two-month campaign starting January 1 next year, aimed at resolving all grievances pending for more than a month with the RBI Ombudsman.
The Repo Rate (Repurchase Option Rate) is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks. It is the primary instrument of monetary policy. A reduction lowers banks’ borrowing costs, thereby incentivizing lending and generally stimulating economic growth.
Policy Relevance
The RBI’s decision to cut the repo rate signals strong confidence that India has successfully anchored inflation, allowing monetary policy to now pivot explicitly to supporting and accelerating economic growth. The proactive campaign to clear the grievance backlog underscores the RBI’s commitment to prioritizing consumer protection and market trust as essential pillars for maintaining financial stability and supporting long-term economic expansion.
Relevant Question for Policy Stakeholders: Following the 100-basis-point policy rate reduction, what additional targeted liquidity or regulatory measures will the RBI introduce to ensure the lending rate cut is fully and swiftly passed on to MSMEs and retail borrowers?
Follow the full news here: Governor’s Statement: December 05, 2025