'Too high real repo rate could have adverse effects on demand, supply'

Repo rate cannot affect food prices. So, keeping it above equilibrium will not lead to faster disinflation. A positive real repo rate is adequate to anchor inflation expectations, says Ashima Goyal

Ashima Goyal, emeritus professor, Indira Gandhi Institute of Development Research, and an external member of the Reserve Bank of India’s (RBI’s) Monetary Policy Committee (MPC) voted in favour of a 25 basis points (bps) cut in repo rate in the June policy meeting against the majority view of status quo. Goyal indicates a growth sacrifice of 1 percentage point – FY25 GDP growth is projected at 7.2 per cent compared to 8.2 per cent in FY24 – if the repo rate is kept unchanged for the next six months, in an email interview to Manojit Saha.

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