RBI Cuts Repo Rate to 6%, Turns Accommodative Amid Global Headwinds Governor Malhotra noted that "a dent on global growth due to trade friction will also impede domestic growth; higher tariffs will have a negative impact on net exports." He added that global economic policies are shifting rapidly, with trade-tariff-related uncertainties clouding the outlook and posing new risks to both growth and inflation

The Reserve Bank of India's Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, lowered the repo rate by 25 basis points to 6 per cent, as announced on April 9. The committee also shifted its policy stance from 'neutral' to 'accommodative'.

This move comes amid signs of slowing growth and easing inflation. The GDP forecast for FY26 has been revised down to 6.5 per cent from 6.75 per cent projected earlier. At the same time, CPI inflation for FY26 is now projected at 4.05 per cent, compared to 4.25 per cent forecasted in February, with quarterly estimates as follows:

• Q1: 3.65 per cent
• Q2: 3.95 per cent
• Q3: 3.85 per cent
• Q4: 4.45 per cent

Governor Malhotra noted that "a dent on global growth due to trade friction will also impede domestic growth; higher tariffs will have a negative impact on net exports." He added that global economic policies are shifting rapidly, with trade-tariff-related uncertainties clouding the outlook and posing new risks to both growth and inflation.

Explaining the rationale behind the rate cut, Malhotra said, "Growth projection for this fiscal has been marked down by 20 basis points, reflecting global trade and policy uncertainties." He also indicated that a slowdown in global growth could lead to softening of commodity and crude oil prices.

Commenting on the move, Shishir Baijal, Chairman and Managing Director of Knight Frank India, said, "We welcome the RBI's 25 basis point repo rate cut as a timely move to support growth amid global and domestic headwinds. With inflation within target and GDP showing softness, the cut aims to boost investment and consumption without fuelling price pressures. We hope that the benefits of this rate cut will be passed to consumers immediately, which is crucial to boost consumption."

He added that the downward revision in GDP growth reflects caution over global trade tensions, though optimism remains for domestic recovery. "A drop in crude prices and a stronger rupee have eased inflation, leading to a revised target of 4 per cent. With a cumulative 50 basis point cut in 2025, it is now vital for commercial banks to transmit the benefit to consumers. Lower borrowing costs can aid housing affordability, developer funding, and infrastructure growth," Baijal said.

DK Srivastava, Chief Policy Advisor, EY India, said RBI's second successive reduction of policy rate of 25 basis points and change of stance to accommodative, signals its willingness to safeguard India's GDP growth prospects, ensuring that it does not fall below 6.5 per cent inspite of the ongoing global tariff turmoil.

He said the RBI recognises that global uncertainties will have an adverse impact on India's growth prospects.

"However, a periodic injection of monetary stimulus supported by maintenance of adequate liquidity conditions and healthy domestic economic conditions including robust agricultural prospects will help India maintain a reasonably high GDP growth in the presence of a likely global growth slowdown. The expectation is that RBI will continue the downward rate cycle by reducing the repo rate all the way to 5.25% by successive reductions of 25 basis points each in the next three rounds. The RBI has indicated its exchange rate assumption of INR86/US$, on average, for 2025-26 inspite of the likely depreciation of many other currencies. Both growth and inflation prospects in India will be helped by a downward movement of global crude prices which will reduce costs in India and make it a relatively more attractive investment destination. Fiscal authorities should now ensure a complementary stimulus by continuing to invest in infrastructure," Srivastava said.

Vishal Goenka, Co-Founder, IndiaBonds.com, stated, "Global central bank policy divergence is at play as RBI cut benchmark repo rates by 25bps to 6 per cent and moved to an accommodative stance. A US Federal Reserve governor last week mentioned the global tariff disruption as possibly inflationary for developed markets. With growth and inflation expectations cut to 6.5 per cent and 4 per cent respectively for FY26, India is expected to grow in a lower inflation environment. The policy is balanced given domestic factors and is pro-growth now. Anticipate a long pause from hereon as future action on rates would depend on global factors again or any exogenous shocks to world economy."

Goenka also pointed out that FPI debt investments have seen net outflows of INR 7,174 crore so far this financial year, including INR 10,000 crore in outflows just yesterday, driven by a meltdown in global markets.

The next meeting of the MPC is scheduled from June 4 to 6, 2025.