In a widely anticipated move, the Reserve Bank of India’s Monetary Policy Committee (MPC) reduced the repo rate by 25 basis points, bringing it down to 6.00 per cent. The announcement came after a three-day meeting concluding on April 9, 2025. RBI governor Sanjay Malhotra, addressing the media, confirmed that the six-member panel voted unanimously in favour of the rate reduction. This marks the second consecutive policy easing under Malhotra’s leadership since he assumed office earlier this year.
Policy Stance Shift to Accommodative
Alongside the rate cut, the committee shifted its policy stance from neutral to accommodative, indicating a pivot towards supporting economic growth amidst persistent global and domestic headwinds. According to the Governor, this change provides directional guidance on interest rates without committing to a fixed liquidity outlook.
India Faces Pressure from US Tariffs and Slow GDP Growth
India’s economic outlook has been under pressure due to recent global developments, particularly a 26 per cent tariff imposed by the United States on Indian exports. Analysts predict that this move could trim 20 to 40 basis points off India’s projected GDP growth. While the RBI maintains a forecast of 6.7 per cent growth for the current financial year, other institutions, including Goldman Sachs, have revised their estimates down to 6.1 per cent.
Liquidity Support Measures Continue
The RBI has injected over USD 80 billion into the banking system in the past two months to sustain market liquidity and promote credit flow. The latest rate cut reinforces the central bank’s ongoing strategy of balancing inflation control with growth support. The Standing Deposit Facility (SDF) rate now stands adjusted at 5.75 per cent, in line with the policy repo rate changes.
Future Outlook: More Rate Cuts Possible
Given the current economic market, financial experts anticipate further policy easing in 2025. An additional 50 basis points cut over the year is expected, while some economists have suggested the possibility of a 35 basis points non-standard reduction if inflation and growth continue to remain below target.
February 2025 Policy Set the Tone
The April decision follows the February 2025 policy, where the RBI implemented its first rate cut in nearly five years, trimming the repo rate to 6.25 per cent and the Cash Reserve Ratio to four per cent. While the stance then remained neutral, the central bank’s readiness to shift gears signalled a broader strategy to support the slowing economy.
Outlook Hinges on Inflation, Global Stability
With inflation easing and oil prices stabilising, the RBI appears to have policy space to act further if needed. However, continued vigilance on global uncertainties remains a priority, particularly in light of volatile trade dynamics and financial market risks.
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