Athira Sethu
Kochi, 9 April 2025
The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points to 6%. The move is being made at a time when international markets are witnessing volatility in light of the prevailing trade tensions, especially after U.S. President Donald Trump declared imposing high tariffs, including a 104% duty on Chinese imports. The worldwide market response to these tariffs has created uncertainty, leading the RBI to cut rates in its bid to support the Indian economy.
In addition to cutting the repo rate, the RBI’s Monetary Policy Committee (MPC) also changed its policy stance from ‘neutral’ to ‘accommodative.’ This shift signals that the RBI is more focused on encouraging economic growth and providing more support to the economy. By adopting an accommodative stance, the RBI signals that it may be willing to make further adjustments to interest rates in the future if needed to keep the economy on track.
RBI Governor Sanjay Malhotra clarified that the decision of the committee was made with the necessity to meet prevailing economic problems and external shocks. The step is designed to promote growth and offset the effects of global economic uncertainties. Malhotra also elaborated that MPC would still continue to target retaining the existing level or cutting the rate further as needed, but currently, no near-term planning for liquidity management changes is envisaged, and this influences how much money to lend in the economy.
In summary, the actions of the RBI are an attempt to stabilize India’s economy in the face of global economic issues. By reducing interest rates and increasing its accommodative policy, the RBI is hoping to stimulate economic growth while dealing with external risks.
