The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to six per cent from 6.25 per cent, as announced by Governor Sanjay Malhotra after the Monetary Policy Committee (MPC) concluded its three-day meeting on 9th April, 2025. This marks the second consecutive rate cut under Malhotra’s leadership and signals a shift in the policy stance from neutral to accommodative, reflecting the central bank’s focus on stimulating economic growth amidst rising challenges.
The recent imposition of a 26 per cent tariff by the United States on Indian exports is expected to reduce the Gross Domestic Product (GDP) growth projections by 20 to 40 basis points. Consequently, institutions like Goldman Sachs have revised India’s GDP forecast for FY2025 from 6.3 per cent to 6.1 per cent, below the RBI’s earlier estimate of 6.7 per cent. The central bank has also trimmed its FY2026 GDP growth projection to 6.5 per cent, citing slower-than-expected economic momentum.
Malhotra emphasised that the accommodative stance aims to support growth without compromising liquidity management. Over the past two months, the RBI has injected over $80 billion into the banking system to ensure adequate credit flow and mitigate economic slowdown risks. The February 2025 repo rate cut (the first in five years) laid the groundwork for this easing cycle, with measures like reducing the Cash Reserve Ratio (CRR) by 50 basis points to enhance liquidity.
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