No need to waste bullet when growth high, inflation low: PwC on Reserve Bank rate cut

New Delhi: Making a case for status quo on interest rate by the RBI, PwC Partner and Economic Advisory Services leader Ranen Banerjee said that any cut at this time would amount to “wasting a bullet” in an environment when growth is robust and inflation is benign.

The Reserve Bank of India (RBI) is unlikely to cut key policy rate in the next Monetary Policy Committee (MPC) meeting next month, he said. The meeting of MPC headed by RBI Governor Sanjay Malhotra is scheduled for February 4-6, 2026. This will be the last meeting of the current fiscal.

If the growth numbers are holding up and base year revision is also on the anvil, which is expected to provide better estimates, then there is no need for rate cut, Banerjee said.

Observing that private capex is not interest rate sensitive, Banerjee said, there will be pick up when capacity utilisation is close to 85 per cent.

“I do not think that the private capex is held up because of the interest rate. It is because there is an uncertainty of demand or the confidence in demand or sustainability of demand is not there and the capacity utilisation is still in the range of 70-75 per cent. Unless capacity utilisation inches close to 85 per cent, there is no immediate urgency for the private sector to put up additional capacity,” he said.

The MPC may possibly continue on a long pause at this point of time and not go for further interest rate cut because it will be a waste of a bullet, he said. “Firing a bullet when it is not needed as we are having good growth and contained inflation. So, there is no need for a rate action at this point of time,” he added.

Last month, the six-member MPC voted unanimously to lower the repo rate by 25 basis points to 5.25 per cent and retained a neutral stance, which give room for further rate cuts. This was the fourth rate cut by the central bank since February 2025. It held rates in August and October bimonthly monetary policy meetings.

During the calendar year 2025, RBI in aggregate reduced repo rate by 125 basis points from a high of 6.5 per cent.

The RBI has been tasked by the government to ensure that consumer price index based retail inflation remains at 4 per cent with a margin of 2 per cent on either side.