The Reserve Bank of India or RBI cut interest rates in the world’s fifth-largest economy on Wednesday as US President Donald Trump’s tariffs kicked in and policymakers warned of “challenging global economic conditions”.
The cut, the second this year, aims to boost a slowing economy grappling with the impact of Donald Trump’s sweeping tariffs.
“The global economic outlook is fast changing,” RBI governor Sanjay Malhotra said during his address. “The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation.”
Top 5 takeaways from RBI MPC announcements
1) Repo rate cut by 25 basis points to 6%
The RBI cut the repo rate by 25 basis points to 6% from 6.25% earlier. This is the second consecutive rate cut, with the previous one in February also being a 25 basis point cut from 6.5% prior to that.
2) India’s GDP forecast cut
The RBI cut its Real GDP forecast for the financial year 2025-26 to 6.5%, from 6.7% earlier.
The first-quarter GDP forecast is now estimated to be 6.5%, the second quarter at 6.7%, the third quarter at 6.6%, and the fourth quarter at 6.3%.
During the previous Monetary Policy decision announcement in February, the first quarter estimate was 6.7%, the second quarter estimate was 7%, and it was 6.5% for both the third quarter and fourth quarter.
3) India’s inflation forecast cut
The RBI cut India’s earlier inflation estimate from 4.2% earlier to 4% now.
The first-quarter inflation estimate is now at 3.6%, second quarter is at 3.9%, third quarter is at 3.8%, and the fourth quarter is slightly higher at 4.4%.
4) Stance changed from ‘neutral’ to ‘accommodative’
The RBI changed its stance from neutral to accommodative, meaning it is now focusing on stimulating the economy through softer interest rates.
“In our context, the stance of monetary policy signals the intended direction of policy rates going forward,” Malhotra said. “Going forward, absent any shocks, the MPC is considering only two options – status quo or a rate cut.
5) Forex reserves stand at $676.3 billion
India’s foreign exchange reserves stood at $676.3 billion as of April 4, 2025, announced Malhotra. This means imports can be covered for about 11 months. This is a key announcement since it comes at a time when global tariff wars with the US are expected to choke the world’s economy.
