RAS question
What was the primary reason for the RBI's easing cycle that began in February 2025?
Correct answer: (B) Supporting growth amid benign inflation conditions.
The RBI's easing cycle that began in February 2025 was primarily aimed at supporting growth while inflation conditions were benign.
Explanation
The easing cycle began because the RBI had room to support economic activity without immediately fighting high inflation. CPI inflation had fallen to record lows, while GDP growth remained robust. In that situation, rate cuts could be used to support growth rather than to address a fiscal or currency crisis. The key logic is the monetary-policy trade-off: when inflation pressure is subdued, the central bank can focus more on sustaining demand and investment. The Reserve Bank of India URL was live when fetched, but its visible press-release content did not substantiate this monetary-policy point, so no additional factual detail has been added from it.
Why the other options are wrong
- (A) A wider fiscal deficit and cheaper government borrowing are not given as the reason; the easing is framed as a growth-support measure made possible by benign inflation.
- (C) Preventing rupee depreciation would usually point towards defending the currency, whereas the RBI cut rates because inflation was low enough to support growth.
- (D) The easing cycle is not described as a response to global rate hikes; the decision is tied to domestic inflation and growth conditions.
Concept
This tests monetary policy transmission and the growth-inflation trade-off. It recurs in RAS because RBI decisions connect macroeconomic indicators such as CPI inflation, GDP growth and interest rates.