RBI rate cut will boost power demand, increase investments in energy projects

The Reserve Bank's first rate cut in five years will boost power demand in India, increase investments in energy transition as well as in oil and gas exploration projects, industry leaders told Moneycontrol on February 7, reacting to the MPC's decision.

The RBI’s six-member Monetary Policy Committee (MPC) cut the repo rate — the rate at which the central bank lends to other banks — by 25 basis points to 6.25 per cent, a first since May 2020. The comes barely a week after the personal income tax relief in the Union Budget, in an effort to boost consumption.

For the energy sector, industry voices believe the move could lead to an uptick in industrial activity, particularly in manufacturing. This, in turn, could increase the demand for power, particularly in industries that rely on electricity for production. As per the Central Electricity Regulatory Commission, India’s peak power demand could touch 270 Gigawatt (GW) this year.

Pankaj Kalra, CEO, Essar Oil and Gas Exploration and Production said the centra bank has signalled a supportive approach toward sustaining economic growth. “For the oil and gas industry, a lower interest rate environment will encourage investment in exploration, infrastructure, and energy transition projects, ensuring a stable and efficient energy ecosystem,” he said.