ANALYZING THE CORRELATION BETWEEN REPO RATE AND MACROECONOMIC STABILITY IN INDIA (2010–2024)

The repo rate defined as the rate at which the Reserve Bank of India (RBI) lends to commercial banks serves as the cornerstone of India’s monetary policy framework. Its fluctuations directly influence borrowing costs, liquidity, investment behavior, and inflation expectations across the economy. This paper examines the impact of repo rate changes on key macroeconomic variables such as growth, inflation, exchange rates, and financial stability. Using a combination of theoretical and empirical evidence, this study identifies the transmission mechanisms and evaluates how effectively repo rate adjustments achieve the dual mandate of price stability and economic growth. Findings reveal that while repo rate hikes control inflation and stabilize the currency, they often slow short-term investment and consumption. Conversely, rate cuts stimulate demand but can heighten inflationary pressure and weaken financial stability. The paper concludes that a balanced, transparent, and data-driven monetary approach complemented by fiscal coordination is vital for sustained macroeconomic equilibrium in India.