As global economic uncertainty rises due to the implementation of new tariffs by the US, India is taking proactive measures to stimulate domestic growth through monetary policy easing and significant personal income tax reforms.
The Reserve Bank of India (RBI) has today reduced the repo rate by 25 basis points, bringing it down to 6%, and has indicated the possibility of further reductions. This move is intended to boost demand and support economic growth by lowering interest rates on various loans, including home, personal, and vehicle loans, as well as deposit rates.
This monetary easing by the RBI is complemented by the Union Budget 2025, which introduces substantial changes to personal income tax slabs across all income groups. These unprecedented tax reforms are designed to achieve several key economic objectives: accelerate GDP growth, encourage inclusive development, invigorate private investments, and uplift household sentiments. The government aims to put more disposable income in the hands of consumers, which in turn is expected to fuel spending and drive economic activity.
The combined effect of the RBI’s repo rate cut and the government’s income tax reforms represents a coordinated strategy to counter the negative impacts of global economic headwinds and foster a robust and sustainable growth trajectory for the Indian economy.
