RBI MPC cuts repo rate by 25 bps to 6% amid market uncertainty, tariff turmoil; shifts to accommodative stance – ET Auto

• ET Online

• Updated On Apr 9, 2025 at 10:26 AM IST

India’s economy is estimated to have grown by 6.5per cent in the last fiscal year—its slowest pace since the pandemic.

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The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday reduced the repo rate by 25 basis points, bringing it down to 6.0per cent from 6.25per cent . 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 26per cent tariff by the United States on Indian exports.

India’s economy is estimated to have grown by 6.5per cent 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 6.3per cent to 6.1per cent , well below the RBI’s estimate of 6.7per cent .

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.

February Policy: A shift in direction

At its previous meeting in February 2025, the MPC had lowered the repo rate from 6.5per cent to 6.25per cent , marking the first rate cut since 2020. The central bank also reduced the Cash Reserve Ratio (CRR) by 50 basis points to 4per cent 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 7.2per cent for 2024–25, higher than the 6.4per cent 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.