Easy Trading Tips– In a strategic move to support domestic growth, the Reserve Bank of India (RBI) reduced its benchmark interest rate by 25 basis points to 6.00% on Wednesday and adopted a more accommodative monetary policy stance, shifting away from its earlier neutral approach.
This marks the second consecutive rate cut by the central bank, following a similar 25 bps reduction in February. The RBI’s decision comes during the first monetary policy meeting of the new financial year and under the leadership of Governor Sanjay Malhotra, who took office in December.
The central bank retained the cash reserve ratio (CRR)—the proportion of deposits banks must hold as reserves—at 4%.
Governor Malhotra highlighted that the rate cut was driven by subdued inflation levels, particularly a marked decline in food prices. He noted that inflation remained well within the RBI’s target band of 4% to 6%, allowing room for a more dovish stance.
Shift Toward Supporting Growth
With signs of economic slowdown emerging—especially weakening consumer demand—the RBI emphasized its commitment to nurturing growth. By shifting to an “accommodative” policy stance, the central bank has signaled it is more likely to cut rates further or maintain low rates for longer, barring unforeseen economic shocks.
“The change in stance implies that the Monetary Policy Committee (MPC) is no longer considering rate hikes at this point. The only options on the table are to hold or cut,” said Malhotra during the policy announcement.
Concerns Over Global Trade and Tariff Impacts
Malhotra also addressed potential external threats to the economy, particularly from global trade tensions. Recent tariff measures introduced by U.S. President Donald Trump have heightened concerns around currency volatility and inflation stemming from costlier imports.
The governor warned that escalating trade conflicts could hamper global growth, indirectly weighing on India’s economy by suppressing export demand. In light of these uncertainties, the RBI trimmed its GDP growth forecast for the 2025–2026 fiscal year to 6.5%, down from its previous estimate of 6.7%.
On the inflation front, the Consumer Price Index (CPI) projection for the year was revised to 4.0%, a notable drop from the 4.8% recorded in the previous year.
This latest policy update is the second under Malhotra’s leadership, following his surprise appointment in December, which occurred amid rising tensions between the RBI and Prime Minister Narendra Modi’s administration over interest rate policy.