In a surprise move, the Reserve Bank of India (RBI) on Friday cut the repo rate by 50 basis points to 5.50%, marking the third consecutive rate cut in 2025. RBI Governor Sanjay Malhotra announced the decision following the Monetary Policy Committee (MPC) meeting.
This latest cut brings the total reduction in 2025 to 100 basis points, following previous cuts in February (25 bps) and April (25 bps)—the first easing cycle since May 2020.
Governor Malhotra attributed the decision to muted inflation, which has provided room to boost economic growth. Retail inflation hit a 6-year low of 3.16% in April, well below the RBI’s 4% target, while core inflation remains subdued.
“India is already growing fast but aspires to grow even faster,” Malhotra said.
India’s GDP grew 7.4% in the January–March quarter, reflecting robust economic resilience. The RBI has maintained its real GDP growth forecast at 6.5% for FY2025–26, with quarterly projections as follows:
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Q1: 6.5%
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Q2: 6.7%
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Q3: 6.6%
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Q4: 6.4%
“The risks to the outlook are evenly balanced,” the governor added.
