Hindi English Translation || Editorial || ​Prudent action: On RBI interest rate cuts

​Prudent action: On RBI interest rate cuts

The RBI needs to be ready for a quick policy pivot (नीतिगत बदलाव) as it cuts rates

The decision made by the Reserve Bank of India’s Monetary Policy (मौद्रिक नीति) Committee (MPC) to cut interest rates once again, by 25 basis points to 5.25%, is both an assessment of India’s current economy and also of what to expect over the next few months. Cumulatively (संचयी रूप से), interest rates have been cut by 125 basis points (बुनियादी निर्देश) in calendar year 2025. The last time such large cuts had been implemented was in 2019 when rates had been cut by 135 basis points, in reaction to a plummeting (गिरना, तेजी से गिरता हुआ) growth rate. India’s quarterly GDP (सकल घरेलू उत्पाद) growth rate had fallen from 8.9% in the March 2018 quarter (तिमाही) to 3.3% by the quarter-ended December 2019. Growth is currently seeing the opposite trajectory (track/course, route, path, direction, approach). It has steadily been accelerating from 5.6% in Q2 of last year to the recently released 8.2% in Q2 of this year. From a growth perspective (दृष्टिकोण, नजरिया), there are at least two ways to look at the MPC’s interest rate moves. The first is that the central bank (the banking regulator of a county’s banking system. (e.g. The Reserve Bank of India (RBI) is the central bank of India)) is not convinced that growth is currently as robust (मजबूत) as the numbers suggest (सुझाव देना, इंगित करना), and so feels monetary policy needs to be as supportive as possible. After all (आखिरकार), it could have left rates unchanged at 5.5%. The second is that the MPC feels that Indian companies are still sitting on excess capacity, and so the risks of overheating (it refers to a situation where the economy is growing too rapidly, leading to excessive demand, high inflation, and the risk of the economy ‘overheating’ and potentially causing economic instability) the economy are slim (small, feeble, poor, minimal, unlikely). So, it might as well push for more growth. The reality is probably a combination of the two: real growth looks higher due to an unusually low deflator (a statistical factor designed to remove the effect of inflation), and companies can certainly afford to invest more, even if this is fuelled (support, encourage, whip up, intensify, exacerbate) by debt (कर्ज, ऋण). A rate cut (दर में कटौती) addresses (tackle, deal with, attend to, try to sort out) both issues.

The MPC also possibly feels that the economic impact of the U.S.’s 50% tariffs (a tax imposed by one country on the goods and services imported from another country) have not yet fully played out (happen, occur, take place, transpire, ensue). Supply chains (आपूर्ति श्रृंखला) take some time to realign (readjust, reposition), and so there might still be a further shift away from Indian exporters. Cheaper credit (the finance provided at a certain (mostly fixed) rate of interest; loan) going ahead (in the future) is something Indian MSMEs, especially exporters, will welcome. On the inflation (simply meaning “cost of living”; increase of price level of goods & services and vice versa decrease of currency value) front, the MPC has lowered its outlook for the year to a benign (mild, favourable, agreeable, advantageous, beneficial, helpful) 2%. However, a jump (a sudden rise/increase) in food prices or oil prices, for whatever reason, will undo (reverse, nullify, revoke, cancel, annul, make ineffective, bring to an end) all its calculations (assessment, judgement, forecast, projection, estimation). The MPC must be ready to raise rates at the first sign of inflation rising faster than expected. The 2019 rate cut episode (event, occurrence, experience, circumstance) saw inflation jumping from 2% in January 2019 to 7.6% in about a year. Taken together (all in all, all things considered, collectively, everything considered), the rate cut suggests that the MPC feels that India’s seemingly (apparently, outwardly, allegedly, supposedly, ostensibly, at first glance) robust growth could do with further help, while inflationary (tending to cause monetary inflation) worries are a thing of the past (something that no longer exists/occurs). Its decision to retain its neutral stance is a prudent one. Global uncertainty (unpredictability, unreliability, riskiness/precariousness) is such that growth and inflation trajectories could reverse (change) direction suddenly, which would need a quick policy pivot.

Courtesy: The Hindu

Important Word List With Meaning

1.prudent (adjective)

Hindi Meaning - विवेकपूर्ण, समझदारी भरा
English Meaning - wise, well judged, well advised, shrewd, sensible, careful, circumspect, far-sighted.

2.supply chain (noun)

Hindi Meaning - आपूर्ति श्रृंखला
English Meaning - a dynamic network when a company purchases or uses goods or services from others. It involves people, information, processes, and resources involved in the production, handling, and distribution of materials and finished products or providing a service to the customer.

3.policy pivot (noun)

Hindi Meaning - नीतिगत बदलाव
English Meaning - policy shift, strategic shift, course correction, change in stance.

4.rate cut (noun)

Hindi Meaning - दर में कटौती
English Meaning - a decision by a central bank (like RBI in India) to reduce its main interest rate to the banks (like SBI, ICICI & etc in India) when these commercial banks get money from the central bank. Once this rate goes down, the banks are in a position to give loans at lower interest rates to individuals and the industry.

5.monetary policy (noun)

Hindi Meaning - मौद्रिक नीति
English Meaning - monetary policy refers to the use of monetary instruments under the control of the central bank to regulate magnitudes such as interest rates, money supply, and availability of credit with a view to achieving the ultimate objective of economic policy mentioned in the Reserve Bank of India Act, 1934.

6.basis point (BPS) (noun)

Hindi Meaning - बुनियादी निर्देश
English Meaning - a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% (1/100th of a percent). Used for measuring change in interest rate/yield.

7.cumulatively (adverb)

Hindi Meaning - संचयी रूप से
English Meaning - in a cumulative manner; collectively, totally.

8.plummeting (adjective)

Hindi Meaning - गिरना, तेजी से गिरता हुआ
English Meaning - decreasing, declining rapidly, falling sharply, plunging, slumping.

9.Gross domestic product (GDP) (noun)

Hindi Meaning - सकल घरेलू उत्पाद
English Meaning - a measure of economic activity in a country. It is the total value of a country’s annual output of goods and service.

10.quarter (noun)

Hindi Meaning - तिमाही
English Meaning - a period of three months (considered as one-fourth of a year).

11.perspective (noun)

Hindi Meaning - दृष्टिकोण, नजरिया
English Meaning - outlook, viewpoint, approach.

12.robust (adjective)

Hindi Meaning - मजबूत
English Meaning - strong, powerful.

13.suggest (verb)

Hindi Meaning - सुझाव देना, इंगित करना
English Meaning - indicate, denote, point to, signify.

14.after all (phrase/adverb)

Hindi Meaning - आखिरकार
English Meaning - most importantly, ultimately, basically; however, nevertheless, in spite of that.

15.debt (noun)

Hindi Meaning - कर्ज, ऋण
English Meaning - liability, financial obligation, borrowed capital.

16.pivot (noun)

English Meaning - the act of changing something (a product, service, strategy, or business model) to achieve better results.

17.the monetary policy committee (MPC) (noun)

English Meaning - it is a six-member panel that is expected to bring “value and transparency” to rate-setting decisions. It will feature three members from the RBI — the Governor, a Deputy Governor and another official — and three independent members to be selected by the Government. The MPC will meet four times a year to decide on monetary policy by a majority vote.

18.trajectory (noun)

English Meaning - track/course, route, path, direction, approach.

19.central bank (noun)

English Meaning - the banking regulator of a county’s banking system. (e.g. The Reserve Bank of India (RBI) is the central bank of India).

20.sit on (phrasal verb)

English Meaning - fail to tackle something.

21.overheating (noun)

English Meaning - it refers to a situation where the economy is growing too rapidly, leading to excessive demand, high inflation, and the risk of the economy ‘overheating’ and potentially causing economic instability.

22.overheat (verb)

English Meaning - (in economics) to grow unsustainably fast, exceeding its productive capacity, leading to excessive demand, low unemployment, and rapidly rising prices (inflation).

23.slim (adjective)

English Meaning - small, feeble, poor, minimal, unlikely.

24.(implicit price deflator) IPD/GDP deflator (noun)

English Meaning - GDP deflator, also known as the GDP price deflator or the implicit price deflator, measures the changes in prices for all of the goods and services produced in an economy.

25.deflator (noun)

English Meaning - a statistical factor designed to remove the effect of inflation.

26.fuel (verb)

English Meaning - support, encourage, whip up, intensify, exacerbate.

27.address (verb)

English Meaning - tackle, deal with, attend to, try to sort out.

28.tariff (noun)

English Meaning - a tax imposed by one country on the goods and services imported from another country.

29.play out (phrasal verb)

English Meaning - happen, occur, take place, transpire, ensue.

30.realign (verb)

English Meaning - readjust, reposition.

31.credit (noun)

English Meaning - the finance provided at a certain (mostly fixed) rate of interest; loan.

32.go ahead (verb)

English Meaning - proceed, advance, progress, and continue.

33.going ahead (phrase)

English Meaning - in the future.

34.inflation (noun)

English Meaning - simply meaning “cost of living”; increase of price level of goods & services and vice versa decrease of currency value.

35.front (noun)

English Meaning - a particular situation; a particular sphere of operation.

36.(outlook) (noun)

English Meaning - prospects, expectations, chances, future.

37.benign (adjective)

English Meaning - mild, favourable, agreeable, advantageous, beneficial, helpful.

38.jump (noun)

English Meaning - a sudden rise/increase.

39.undo (verb)

English Meaning - reverse, nullify, revoke, cancel, annul, make ineffective, bring to an end.

40.calculation (noun)

English Meaning - assessment, judgement, forecast, projection, estimation.

41.episode (noun)

English Meaning - event, occurrence, experience, circumstance.

42.taken together (phrase)

English Meaning - all in all, all things considered, collectively, everything considered.

43.seemingly (adverb)

English Meaning - apparently, outwardly, allegedly, supposedly, ostensibly, at first glance.

44.inflationary (adjective)

English Meaning - tending to cause monetary inflation.

45.a thing of the past (phrase)

English Meaning - something that no longer exists/occurs.

46.uncertainty (noun)

English Meaning - unpredictability, unreliability, riskiness/precariousness.

47.reverse (verb)

English Meaning - change.