The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday reduced the repo rate by 25 basis points, bringing it down to 6.0% from 6.25%.
The decision, announced by RBI Governor Sanjay Malhotra, follows a three-day meeting of the six-member panel that began on April 7.
The six-member committee also decided to change the policy stance to accommodative from neutral. “Our stance provides policy rate guidance without any direct guidance on liquidity management,” said the Governor. A poll conducted by The Economic Times earlier had predicted a similar move from the central bank.
This marks the second consecutive cut under Governor Malhotra, who took office earlier this year. The move comes at a time when the Indian economy faces multiple external and domestic pressures, including the implementation of a 26% tariff by the United States on Indian exports.
India’s economy is estimated to have grown by 6.5% in the last fiscal year—its slowest pace since the pandemic. The US tariffs are expected to shave off 20 to 40 basis points from India’s projected growth, according to analysts. As a result, several institutions, including Goldman Sachs, have trimmed their 2025 GDP forecast for India from 6.3% to 6.1%, well below the RBI’s estimate of 6.7%.
To support growth, Governor Malhotra has steered the central bank toward a more accommodative policy. This includes over $80 billion in liquidity support through the banking system over the past two months and the February rate cut—RBI’s first in five years.
In its current assessment, the central bank cited softer-than-expected inflation and easing oil prices as reasons to continue with its supportive stance. “As the RBI MPC is faced with inflation and growth outcomes that are below their estimated trajectory, it opens policy space to deliver a second successive policy repo rate cut,” Bloomberg quoted Aastha Gudwani, an economist at Barclays Plc, as saying.
She also suggested that there was a “strong case” for considering a non-standard rate cut of 35 basis points.
At its previous meeting in February 2025, the MPC had lowered the repo rate from 6.5% to 6.25%, marking the first rate cut since 2020. The central bank also reduced the Cash Reserve Ratio (CRR) by 50 basis points to 4% in a bid to improve banking system liquidity and boost credit flow.
The MPC retained its neutral stance in February, a position it first adopted in October 2024. This flexibility allows the RBI to respond to evolving economic conditions without being tied to a specific policy direction.
At the time, the RBI had projected a GDP growth rate of 7.2% for 2024–25, higher than the 6.4% outlined in the Economic Survey. The committee said that inflation was expected to remain within target, providing room for continued policy easing to support economic activity.
With risks to global trade and domestic growth intensifying, the RBI’s latest move reflects a cautious effort to provide economic support without compromising financial stability.
