RBI MPC Cuts Repo Rate by 25 bps to 6% Amid Market Uncertainty, Tariff Turmoil

Ira Singh
Khabar Khabaron Ki,09 April’25

The Reserve Bank of India (RBI) on Wednesday lowered the key policy repo rate by 25 basis points to 6.0%, marking the second straight reduction under Governor Sanjay Malhotra. The decision was made after a three-day meeting of the Monetary Policy Committee (MPC), and comes at a time when India’s economy is facing pressure from both domestic and international challenges, including higher tariffs imposed by the United States.

According to official release,the six-member MPC also shifted its policy stance from “neutral” to “accommodative,” signaling greater flexibility in supporting economic recovery going forward. “Our stance provides policy rate guidance without any direct guidance on liquidity management,” Governor Malhotra said during the press briefing, reinforcing the RBI’s commitment to preserving monetary stability while stimulating demand.

India’s economy is estimated to have grown by 6.5% in the last financial year, which is the slowest pace since the pandemic. New U.S. tariffs on Indian exports—set at 26%—are expected to reduce India’s growth further by up to 40 basis points, according to experts. In response to these pressures, global institutions like Goldman Sachs have lowered their GDP growth forecasts for India from 6.3% to 6.1% for the year. However, the RBI has maintained a more optimistic projection of 6.7%.

In addition to cutting the policy rate, the RBI has provided over $80 billion in liquidity to the banking system over the last two months to ensure the smooth flow of credit. The central bank also pointed out that inflation has been lower than expected and global oil prices have eased, which gave them more space to reduce rates and support the economy.

This latest move follows the rate cut in February 2025, when the RBI lowered the repo rate from 6.5% to 6.25% and reduced the Cash Reserve Ratio (CRR) by 50 basis points to 4%. At that time, the MPC kept a neutral stance, allowing flexibility to adjust policy as needed. Economists say the central bank is responding sensibly to current conditions, focusing on growth while keeping an eye on inflation. Many believe that as long as inflation stays within the target range and growth remains under pressure, there is room for more supportive measures in the months ahead.

Key Takeaways:

•RBI MPC cuts repo rate by 25 bps to 6.0%, second straight cut in 2025.
• Policy stance changed to ‘accommodative’ from ‘neutral’.
• Decision comes amid slowing growth, US tariffs, and subdued inflation.
• GDP growth forecast by global institutions lowered to 6.1%; RBI projects 6.7%.
• Over $80 billion in liquidity infused in past two months.
• Inflation within target range, oil prices easing. RBI lowers FY26 inflation projection to 4 per cent from 4.2 pc projected earlier