RBI Cuts Repo Rate to Support GDP Growth Amid Global Uncertainties

The Reserve Bank of India (RBI), under the leadership of Governor Sanjay Malhotra, has announced a significant monetary policy adjustment in response to growing global economic uncertainties. The Monetary Policy Committee (MPC) has unanimously decided to reduce the key policy repo rate by 25 basis points to 6%, aiming to stimulate economic growth.

Key Highlights: The MPC has also shifted its policy stance from neutral to accommodative, signaling potential future rate cuts to further support growth. The GDP growth outlook for FY 2025-26 has been slightly adjusted to 6.5%, down from the previous estimate of 6.7%, while CPI inflation is projected to remain benign at 4% for the current financial year.

Global Trade Tensions and Economic Implications

The decision comes at a time when the Donald Trump administration has imposed a 26% reciprocal tariff on Indian goods, adding to the global trade tensions. These developments pose new challenges to global growth and inflation, exacerbating the economic outlook uncertainties.

RBI's Forward-Looking Approach: Governor Malhotra emphasized the need for a growth-supportive monetary policy, vigilant of inflation risks. The RBI aims to achieve non-inflationary growth through improved demand and supply responses, maintaining macroeconomic balance.

Looking Ahead

With the global economic landscape rapidly changing, the RBI's agile and decisive policy measures are crucial for navigating through these uncertain times. The focus remains on fostering sustainable growth while keeping inflation in check.