In a bid to sustain non-inflationary growth and respond to mounting global economic challenges, the (RBI) on Wednesday announced a 25 basis point cut in the policy repo rate.
The move, declared by Sanjay Malhotra, brings the benchmark rate down to 6 per cent. It marks the second consecutive rate cut by the central bank in 2025, as inflation moderates and external pressures intensify.
The decision by the RBI’s Monetary Policy Committee (MPC), announced during the first bi-monthly review of FY26, was unanimous. The cut follows a similar reduction in February, when the repo rate was brought down to 6.25 per cent — the first revision since May 2020.
“The MPC voted unanimously to cut the repo rate by 25 basis points to 6 per cent,” said Malhotra, explaining that the central bank is now shifting its stance from neutral to accommodative. “In light of ongoing global economic uncertainty, the MPC is considering only a status quo or rate cut in the near term,” he added, while offering no clear direction on liquidity management.
Malhotra underscored the turbulent global context influencing the RBI’s decision, alluding to the sweeping tariffs imposed by US President Donald Trump.
In a fresh escalation of trade tensions, the United States implemented a 26 per cent reciprocal tariff on Indian imports, effective 9 April — minutes before Malhotra began his policy address.
The move, part of a broader set of tariffs rolled out by the US administration, is expected to weigh heavily on global trade flows and complicate policymaking for emerging economies like India.
The RBI Governor acknowledged that these tariffs are likely to impact India’s merchandise exports and create upward pressure on inflation. Nevertheless, the central bank retained its inflation projection at 4 per cent for FY26, while GDP growth is now forecast at 6.5 per cent.
Economists, however, caution that the newly announced tariffs could shave 20 to 40 basis points off India’s growth rate, bringing it down to approximately 6.1 per cent.
“Investment activity has gained traction and is expected to improve further, driven by sustained capacity utilisation,” said Malhotra, even as he warned of additional strain on the Indian rupee amidst global volatility.
Analysts had widely anticipated a rate cut, given the twin imperatives of managing inflation and stimulating demand in a climate of escalating trade tensions. Many believe the central bank's policy easing may offer a buffer to growth, especially as the Trump tariffs are poised to raise import costs and potentially stifle consumer demand.
With this move, the RBI aims to strike a balance between fostering growth and safeguarding price stability, even as global headwinds present significant challenges in the months ahead.
