Economic Headwinds Prompt RBI to Cut Rates, Downgrade GDP Projection

The last meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) revealed a significant new development for citizens of India. Bank Governor Sanjay Malhotra stated that due to the country’s recent economic conditions and global uncertainty, the repo rate has been lowered by 25 basis points to a current standing of 6.25 percent.

The governor cited the new tariffs on goods announced by former U.S. President Donald Trump as a main cause of this repo rate reduction, noting that this policy will cause further uncertainty in international trade. The Reserve Bank acknowledged that global pressure would eventually impact the Indian economy as a result.

The RBI also stated that it had downgraded its GDP growth outlook for India from 6.8 percent to 6.5 percent. Reasons stated involved volatility in international markets, investment reluctance on an international level, and the possibility that exports may be disrupted.

The Reserve Bank stated that it will sustain an ‘accommodative’ policy stance to ensure that the domestic economy remains anchored and liquidity in the market remains managed effectively. This means that in the event the situation unfolds further, additional measures can be taken.