RBI Cuts Repo Rate by 25 bps to 6%: Balancing Growth Amid Global Headwinds



Monetary Policy Update: Repo Rate Reduced to 6%

In a proactive move aimed at supporting domestic economic recovery amidst rising global uncertainties, the Reserve Bank of India (RBI) on Wednesday announced a 25-basis-point cut in the repo rate, reducing it from 6.25% to 6%.

This decision was made during the three-day Monetary Policy Committee (MPC) meeting held on April 7–9, and it marks the second consecutive repo rate cut, following a similar reduction in February 2025.

RBI Governor Sanjay Malhotra announced that the decision was taken unanimously after a detailed macroeconomic review. The aim is to stimulate growth while keeping inflation under control.

Global Outlook Influencing Policy Decisions

Governor Malhotra noted that global economic conditions are shifting rapidly, largely due to recent tariff-related developments and trade tensions. These have led to increasing uncertainty in international markets, causing volatility in commodity prices, and posing challenges for export-dependent economies like India.

He said, “The global economic outlook is fast changing. The recent trade tariff-related measures have exacerbated uncertainties, clouding the economic outlook across regions. Amidst this turbulence, the US dollar has weakened appreciably.”

Adjustments to Key Policy Rates

Following the repo rate reduction:

  • Standing Deposit Facility (SDF) rate stands adjusted to 5.75%

  • Marginal Standing Facility (MSF) rate and the Bank Rate have been revised to 6.25%

These changes are aimed at maintaining adequate liquidity while ensuring credit availability at lower costs.

Inflation: Well-Managed and Within Target

The MPC noted that inflation currently remains below the target level, supported primarily by a decline in food inflation. According to the Governor, “There is now a greater confidence of a durable alignment of headline inflation with the target of 4% over a 12-month horizon.”

This provided the central bank with the policy space to support growth without compromising price stability.

GDP Outlook Revised: 6.5% Growth for FY 2025-26

The RBI also revised its real GDP growth forecast for FY 2025–26 to 6.5%, slightly lower than the earlier estimate of 6.7%, after the economy posted a strong 9.2% growth in FY 2024–25 (as per MOSPI data).

The revision reflects a cautious optimism in light of persistent global headwinds.

Sector-Wise Growth Expectations

  • Agriculture: Expected to perform well owing to healthy reservoir levels and good crop prospects.

  • Manufacturing: Gaining pace, with improving business confidence.

  • Services: Continues to exhibit resilience, making steady contributions to GDP.

  • Investments: Showing strong momentum, driven by:

    • High-capacity utilization

    • Continued infrastructure spending by the government

    • Strong balance sheets of banks and corporates

    • Easing of financial conditions

Demand Dynamics and Export Concerns

Domestic rural demand is likely to stay strong due to favorable agri conditions, while urban consumption is recovering, aided by rising discretionary spending.

However, the Governor cautioned that merchandise exports may come under pressure due to the global slowdown and trade-related disruptions. In contrast, services exports remain robust, offering a cushion to the overall growth momentum.

Final Takeaway

The RBI’s latest policy decisions reflect a delicate balancing act — supporting economic revival while navigating global uncertainties. With inflation under control, the central bank is prioritizing growth without losing sight of stability, signaling confidence in India’s macroeconomic fundamentals.

As India steps into FY 2025–26, all eyes will be on how external shocks evolve and how quickly domestic momentum can offset global disruptions.


Location: Pune, Maharashtra, India

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