Keeping the repo rate at 6.50% while most Asian peers cut rates risks choking India’s already fragile growth, as higher borrowing costs dampen investment and consumer spending.
The Indian economy has slowed to around 5% annual growth, and sectors such as real estate and small‑business credit are feeling the strain of expensive loans tied to the RBI’s policy rate.
A strong rupee induced by a high policy rate can hurt exporters by making Indian goods less competitive, potentially widening the trade deficit and limiting job creation in export‑oriented industries.
Moreover, the policy gap widens the incentive for capital to flow into short‑term instruments rather than productive investment, which could exacerbate asset‑price volatility in the equity and bond markets.
If inflation shows a sustained downward trend, critics argue the RBI should begin a calibrated easing cycle now to support demand, avoid a credit squeeze, and keep India’s growth trajectory on track with its regional competitors.