RBI MPC Meeting 2025: RBI Rate Cut to Drive Growth in Auto, Real Estate, and Consumer Durables

The Reserve Bank of India (RBI) announced a 25-basis-point reduction in the repo rate on February 7, bringing it down to 6.25%. This move is anticipated to stimulate sectors such as automobiles, real estate, and consumer durables, which have been grappling with sluggish demand due to persistent inflationary pressures.

Looking ahead, economic growth in 2025-26 is expected to be supported by a strong rabi harvest and a rebound in industrial activity. On the demand front, household consumption is likely to stay resilient, aided by tax relief measures introduced in the Union Budget 2025-26, according to RBI Governor Sanjay Malhotra. Malhotra, who chaired his first monetary policy committee (MPC) meeting since assuming office in December, stated that the committee had unanimously decided to lower the repo rate from 6.5% to 6.25%.

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The reduction in borrowing costs is expected to benefit consumer durables companies such as Voltas and Havells, as it makes financing more affordable, potentially boosting sales of household goods, noted Narendra Solanki, Head of Research at Ananth Rathi.

While rural demand is on the rise, urban demand presents a mixed picture. However, improving employment conditions, tax incentives, and easing inflation are expected to have a positive impact on household consumption, Malhotra added.

Impact on Key Sectors

Automobiles: The automobile industry is expected to be one of the biggest beneficiaries of the rate cut. Lower interest rates on car loans will make vehicle financing more affordable, potentially boosting sales across segments, from two-wheelers to commercial vehicles. This comes at a crucial time when the industry has been facing headwinds due to high fuel prices and global supply chain disruptions. Auto companies such as Maruti Suzuki, Tata Motors, and Mahindra & Mahindra are likely to see increased consumer interest in their products.

Real Estate: The real estate sector, which heavily depends on home loans, is also set to gain from the rate reduction. Lower EMIs (equated monthly installments) may encourage more homebuyers to enter the market, especially in the mid- and affordable-housing segments. This could provide much-needed momentum to the sector, which has been dealing with high input costs and cautious consumer sentiment. Real estate developers expect an uptick in demand, particularly in metropolitan areas where property prices have remained high.

Consumer Durables: The cut in interest rates is expected to drive demand for household appliances such as refrigerators, washing machines, and air conditioners. With financing becoming cheaper, consumers may be more inclined to purchase high-value items, boosting sales for companies such as LG, Samsung, and Whirlpool. This sector, which typically sees strong seasonal demand, could experience higher growth in the coming months, especially as inflationary pressures ease.

Economic Outlook and Future Policy Decisions

The RBI’s decision to lower the repo rate is seen as a step to strike a balance between controlling inflation and supporting economic growth. While inflation has shown signs of moderating, it remains a concern, particularly due to global factors such as fluctuating oil prices and geopolitical uncertainties. The central bank will likely continue monitoring inflation trends before making further adjustments to the policy rate.

Economists believe that the current rate cut could be followed by further reductions if inflation remains under control. However, much will depend on domestic and international economic conditions, including the pace of recovery in industrial activity and the impact of global economic trends on India’s exports and investments.

For now, the repo rate cut is expected to provide a much-needed boost to consumer and business confidence, potentially accelerating growth in key sectors. With a supportive policy environment and positive macroeconomic indicators, India’s economy is poised for steady expansion in the coming fiscal year.