The Reserve Bank of India (RBI) Friday slashed the repo rate by 50 basis points to 5.50%, in the third consecutive cut since February 2025. Industry leaders, economists, and market experts welcomed the decision, calling it bold, timely, and growth positive.

The Monetary Policy Committee's unanimous vote comes amid moderating inflation, a weakening global growth backdrop, and tepid domestic consumption trends. While the policy surprised many by exceeding the widely anticipated 25-bps cut, industry leaders broadly acknowledged the move as a “front-loaded” intervention to energise consumption and credit activity.

Given the current global economic uncertainty, the monetary policy has done the maximum possible to keep the Indian economy on a path of growth, said Rajeev Singh, Director General, Indian Chamber of Commerce. “We observe that the monetary policy is working in sync with the fiscal policy to keep our economy on a high-growth path,” he said.

Economists and market participants noted that the RBI’s shift in policy stance from "accommodative" to "neutral" indicates a more balanced approach, reducing the probability of aggressive cuts in the near term. “Coupled with the shift to a neutral stance, it signals a more balanced and measured approach. This move will ease borrowing costs and enhance liquidity, benefiting MSMEs and retail loan borrowers… This step will positively influence India’s economic momentum amid global headwinds,” said Yashish Dahiya, Chairman & Group CEO of PB Fintech.

Experts believe that the move is expected to ease borrowing costs, improve liquidity, and support segments such as MSMEs, housing, and private investment—all of which are critical to sustaining India’s growth momentum. “...softening inflation trends are expected to remain within or broadly below the tolerance limit and a likely demand recovery can be viewed as positive. A surprise CRR cut of 100bps over four tranches effective from September 2025 should provide a further liquidity boost, supporting credit growth for banks,” said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.

"The rate cut will serve as a positive catalyst for consumption and investment, particularly in interest-sensitive sectors such as automobiles, housing, and MSMEs. It will also ease borrowing costs, improve liquidity, and further strengthen the momentum behind India’s infrastructure and manufacturing push," said Anish Shah, group CEO & MD, Mahindra Group.

“An alternate bout of dovishness comes from the 100-bps cut in CRR in four tranches of 25 bps each over the year that will release ₹2.5 lakh crore of liquidity. This is meant to speed up the rate cut transmission that is slow as of now. A brake on further rate cuts suggests that the RBI is finally concerned about foreign exchange, but to keep the domestic growth engine running, (it is) continuing to give liquidity boost,” said Anitha Rangan, Economist, Equirus Securities.

Several economists interpreted this policy as a landmark shift—one that may go down as a pivotal point in India’s growth trajectory. With inflation projected to stay below the 4%-mark and the GDP growth forecast maintained at 6.5% for FY26, the current policy mix of rate and liquidity support could reinforce confidence among borrowers and investors alike.

“The policy rate easing, combined with the liquidity increase for banks when system liquidity is already comfortable, is likely to add a second engine to the consumption growth flight that is anticipated to be already in flight from the income tax cuts taking effect in FY26. This is significantly positive for urban consumption, and will also likely add a fillip to real estate, discretionary purchases, and private capex,” said Ranen Banerjee, partner and leader, economic advisory, PwC India.

"These measures are timely in easing systemic liquidity and lowering borrowing costs, which will help stimulate domestic consumption and support the investment cycle—both vital for sustaining India’s growth momentum. The ₹2.5 lakh crore of primary liquidity...creates a more favourable environment for transmission, enabling more affordable financing for MSMEs, retail borrowers, and the housing sector—especially in the affordable and low-ticket home loan segment," said Rajiv Sabharwal, MD & CEO, Tata Capital.

"We see this as an opportunity to step up credit deployment, especially towards productive sectors and retail demand, while continuing to support MSMEs, retail, agri, and other priority segments," said Ashok Chandra, MD and CEO, Punjab National Bank.

Commenting on inflation, Rangan said, “…it appears that it is no longer about growth-inflation; it is about external versus internal. Front loading is necessary for growth but externalities are keeping further cuts away. Do what it takes now–risks will be managed down the road.”

"While the policy is clearly growth-focused, the change in stance signals that future rate actions will be more measured, and bond markets may stay range-bound as they await further macro cues," said Nikhil Gite, head of fixed income, Neo Asset Management Pvt Ltd.

"The RBI has struck the right balance—prioritising growth without compromising its inflation mandate, which is critical in the current global economic climate," said Ficci president Harsha Vardhan Agarwal.

Real estate to see improved affordability

The rate cuts are particularly expected to improve affordability across segments in the real estate sector. India’s real estate sector is poised to benefit meaningfully from the Reserve Bank’s aggressive rate cuts and liquidity infusion.

“With this, the cumulative cut for this year of 1% is indeed going to help translate into lower EMIs and relatively better affordability, thereby helping the mid-segment housing across top tier cities. Lower borrowing costs will significantly improve the viability of capital-intensive developments, particularly in high-growth sectors such as global capability centres, data centres, and the industrial & logistics segment,” said Anshul Jain, chief executive, India, SEA & APAC Tenant Representation, Cushman & Wakefield.

Calling the move as a strong tailwind that lowers borrowing costs both for buyers and developers, and enhancing affordability in the affordable and mid-income housing segments, Vimal Nadar, national director & head-research, Colliers India, notes, “This could lead to improved buyer sentiment, an increase in residential property enquiries and conversions, and a pickup in sales volumes across key urban markets. Over the medium term, the reduction in the cost of capital is also expected to enhance investor confidence, potentially boosting activity in both residential and commercial real estate segments.”

“Reduced EMIs are expected to significantly improve buyer sentiment and encourage first-time homebuyers to enter the market. Lower interest rates will increase homebuyer affordability and improve the financial viability of affordable housing projects,” added Credai president Shekhar G. Patel.

"Over the past few years, the strong housing market momentum was increasingly concentrating in the premium end even as there were signals of weakening the lower segments. With this cumulative 100 basis point cut in the policy interest rate we expect rekindling of the lower segments as affordability will witness a meaningful improvement for such homebuyers," said Shishir Baijal, chairman and managing director, Knight Frank India.

"For the real estate sector, which has already been witnessing mellowed growth, this move is the right dosage which was required to unleash the animal spirits," said Piyush Bothra, co-founder and CFO, Square Yards.

What’s next?

Looking ahead, there is a broad consensus that the RBI’s future policy decisions will be closely tied to evolving data on inflation, growth, and global cues. While the window for additional rate cuts has narrowed due to the change in stance, the groundwork has been laid for sustained credit expansion and investment revival.

Amar Ambani, executive director at YES Securities, expects that following the rate cut, the RBI may consider widening the Liquidity Adjustment Facility (LAF) corridor by increasing the spread between the repo rate and the Standing Deposit Facility (SDF) rate to 50 basis points from the current 25 basis points.

“Such a move would aim to discourage banks from engaging in risk-free arbitrage—borrowing via the triparty repo market and parking excess funds in the SDF. Instead, it would incentivise greater lending activity. This adjustment in the corridor could help redirect surplus liquidity toward productive credit deployment, especially crucial at a time when credit growth momentum appears to be slowing,” Ambani added.

While industry sentiment remains optimistic, PHDCCI president Hemant Jain cautions, “Going forward, India will continue to grow resiliently and robustly, supported by strong macroeconomic fundamentals and price, financial, and political stability. Geopolitical tensions and global trade uncertainties pose downside risks.”