The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) reduced the repo rate from 0.25 percent to 6.25 percent in the February review meeting. This decision was taken to speed up economic growth. The central bank has cut the repo rate after about 5 years. This is expected to promote sectors such as automobile, real estate and consumer durables with the help of increase in consumption. These sectors are struggling with demand about demand amid high inflation pressure.
Narendra Solanki, the research head of Anand Rathi, says sectors such as consumer dybles, including companies like Voltas and Havels, are expected to benefit. This is because financial costs will decrease and sales of household goods will increase.
Household consumption expected to be strong from tax relief
Describing the decision of the Monetary Policy Committee, the new RBI Governor Sanjay Malhotra said, “Further, economic development should be supported in FY 2025-26 due to the expected improvement in healthy Rabi crops and the expected improvement in industrial activity. Household Consumption’s Union Budget is expected to be strong with the help of tax relief received in 2025-26. “
The RBI Governor further said that the rural demand is a rapid trend, while the urban demand is mixed. Improvement in employment situation, tax exemption, reduction in inflation etc. are good signs for domestic consumption.
Pressure shown in Sensex and Nifty on the day of RBI policy, shopping in these four stocks will be strong
What tax relief in budget
The steps to cut the repo rate will strengthen the steps taken to promote consumption in the budget. The government has made the annual taxable income tax free of up to Rs 12 lakh under the new income tax system in the budget 2025. This can be done with the help of a rebate. The basic tax exemption limit has been increased to Rs 4 lakh. Apart from this, changes have also been made in the tax slab. In case of interest income for senior citizens, the tax exemption limit has been increased to Rs 1 lakh.