In face of trade war, rbi cuts repo rate by 0.25%, trims this year’s gdp growth forecast to 6.5%

RBI Governor Sanjay Malhotra Announced The First BI-monthly Monetary Policy of the Current Fiscal. File | Photo Credit: Reuters

The reserve bank of India slashed the repo rate by 25 Basis points to 6% on wedding, with its monetary policy committee Voting unanimously to reduce the policy rate in a bid to support and brings doves Interest Burden on Home, Auto, And Other Loan Borrows. However, this will also reduce the interest earned on saving by depositors.

The move comes against the backdrop of an escalating global trade war, triggered by us president Donald Trump’s Wide-Ranging Tariffs. The mpc has also lowered its forecast for India’s GDP growth this year, from 6.7% to 6.5%.

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This is the second time in a row that mpc has cut the repo rate by 25 Basis points (BPS) or 0.25%. The committee, Headed by RBI Governor Sanjay Malhotra, also unanimously of the trade war, than about inflation. This is a policy stance “geared towards stimulating the economy through softter interest rates,” Mr. Malhotra said, signalling the likelihood of further rate cuts.

Growth impact

“Uncertainty in Itself Dampens Growth by Affecting Investment and Spending Decisions Businesses and Households,” Malhotra said, in a monetary policy statement explaining the situation. “Second, the dent on global growth due to trade front

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“There, however, Several Known Unknowns – The Impact of Relative Tarifs, The Elasticities of Our Export and Import Demand; and the policy measures adopted by the government, including, the promise Foreign Trade Agreement with the Usa, to name a less. Malhotra Emphasised.

Inflation Risks

The risks to inflation, on the other hand, are two-sided, he pointed out. “On the UPSIDE, UncertainTies May Lead to Possible Currency Pressures and Imported Inflation. Pries, putting downward pressure on inflation, ”He said.

“Overall, While Global Trade and Policy UncertainTies Shall IMPEDE Growth, its impact on domestic inflation, while requires us to be vigilant, is not expected to be of height.

Uncertain Forecasts

Taking Various Factors Into Consideration, Real GDP Growth for 2025-26 is now projectioned at 6.5% (down from the 6.7% projectioned in februry), with a first Quarter Growth Forecast of 6.5%, and the Subsequent Three Quarters at 6.7%, 6.6%, and 6.3%Respatively.

While the risks are even Balanced Around these baseline projections, uncertaintes remain high in the wake of the recent spike in global Voltyity, “The RBI GOWARNOR SAID.

Taking Various Factors Into Consideration, and Assuming a Normal Monsoon, CPI Inflation for the Financial Year 2025-26 is projected at 4%, with Q1 at 3.6%, Q2 at 3.9%, Q3 at 3.8%, and Q3 at 3.8%, and Q4 AT 4.4%, Q2 at 3.8%, and Q4 AT 4.4%. The risks are even balanced.

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Noting that the Global Economy was going through a period of exceptional uncerties, he said, “The Difeculty to ExTRACT SIGNAL S SIGNAL SHATE SINL from A Noisy and ENCERTAINMENMEN ENVINMENMES FOR POLICY Making

Aiming for non-inflationary growth

Mr. Malhotra added that the domestic growth-inflation Trajectory Demanded Monetary Policy that is Growth Supportive, While Being Watchful on the Inflation Front.

“We are aiming for a non-inflationary growth that is bill on the foundations of an improved demand and supply response and sustained macroeconomic balance. Response and put in place policies that are clear, consistent, credible and in the best interest of the economy, “He concluded.

The repo rate cut means that the standing deposit facility (SDF) under the Liquidity Adjustment Facility (LAF) will stand adjusted to 5.75%, and the Marginal Standing Facility (MSF) Rate and the Bank Rate to 6.25%.