New Delhi: The Reserve Bank of India (RBI) has slashed its benchmark interest rate by 25 basis points, reducing the repo rate from 6.25% to 6%, in a move to counter rising global trade tensions and a slowing domestic economy.
This is the second rate cut this year, following the February reduction, and reflects the central bank’s shift to an ‘accommodative’ policy stance.
The cut comes on the heels of US President Donald Trump’s sweeping tariff hikes, which have triggered global economic jitters and prompted a series of growth downgrades worldwide.
The RBI also downgraded India’s growth projection for the current fiscal year from 6.7% to 6.5%, citing weakening trade flows and external uncertainties.
The change in the RBI’s monetary policy stance from “neutral” to “accommodative” signals a greater willingness to introduce further rate cuts to stimulate the economy.
“Concerns on trade frictions are coming true and unsettling the global community,” said RBI Governor Sanjay Malhotra.
The repo rate, which determines the cost at which the central bank lends to commercial banks, plays a crucial role in shaping borrowing rates across the economy. Lower interest rates are intended to encourage investment and consumer spending.
Beginning this week, Indian exports to the US are subject to new tariffs of up to 27%, a move that has further complicated India’s economic outlook.
Although the tariffs on India are less severe than those imposed on China (104%) or Vietnam (46%), the long-term impact remains uncertain.
Despite the slowdown, India continues to hold the title of the world’s fastest-growing major economy, with projected GDP growth of 6.5% for the current and upcoming fiscal year.
