RBI rate cut to enhance affordability, aid further growth of auto industry
- IBEF
- December 8, 2025
A further increase in the strength and importance of the vehicle sector is expected following the Reserve Bank of India (RBI) 's recent announcement reducing the interest rate from 5.50% to 5.25%. The announcement by The Society of Indian Automobile Manufacturers (SIAM) supported this assertion, with SIAM President Shailesh Chandra stating that the latest RBI interest rate change will add to the already positive and supportive monetary policy resulting from previous repo rate reductions. This positive environment for monetary policy, along with the continuing successful initiatives by the Indian government, will increase the ability of all types of customers to buy vehicles, regardless of the segment in which they are being sold. Chandra further pointed out that the tax reduction measures to be implemented as part of the Union Budget for 2025-26 will support consumers with additional disposable income to purchase vehicles. The implementation of the GST (Goods and Services Tax) reforms (referred to as GST 2.0) will provide further hope for consumers, as they will reduce the inefficiencies created by embedded taxation throughout the vehicle supply chain.
Industry leaders are hopeful that, at least in the short term, the synchronised effects of both fiscal and monetary policy will enhance the growth trajectory of India's automobile market, as signs of increased demand are returning. Additionally, due to the growing demand fundamentals and continued government support through reforms, the automobile industry expects strong sales and investment activity over the next several months.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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