MUMBAI: The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday cut the benchmark repo rate by 25 basis points to 6 per cent and shifted its stance to ‘accommodative’, as the central bank looks to shield the economy from rising global headwinds – particularly the trade tensions triggered by fresh US tariffs.
The move, announced by Governor Sanjay Malhotra at the conclusion of the three-day policy meeting, comes amid heightened uncertainty after US President Donald Trump slapped a 26per cent tariff on Indian goods.
The policy stance change signals that the MPC now sees scope only for further cuts in repo rate or status quo, not hikes.
“In our context, the stance of monetary policy signals the intended direction of policy rates going forward,” said Malhotra, explaining that the change to ‘accommodative’ allows the committee to support growth while remaining vigilant on inflation.
History repeats: April déjà vu
This marks the second straight rate cut under Governor Malhotra and echoes an identical move from exactly six years ago – on April 4, 2019 – when the MPC also cut the repo rate from 6.25 per cent to 6.0 per cent.
Alongside the rate cut, the RBI has injected over $80 billion in banking system liquidity since February – when it cut rates for the first time in five years – in a bid to prop up demand and credit flow.
Growth forecasts trimmed
Amid the tariff turmoil, the RBI revised India’s FY26 GDP growth forecast downward to 6.5 per cent from 6.7 per cent, citing “global trade and policy uncertainties.”
Analysts estimate the new US tariffs alone could shave 20–50 basis points off India’s growth.
Quarterly growth estimates were also trimmed:
- Q1: 6.5% (vs 6.7%)
- Q2: 6.7% (vs 7%)
- Q3: 6.6% (vs 6.5%)
- Q4: 6.3% (vs 6.5%)
“The global economy is navigating exceptional uncertainties… In such an environment, the policy needs to support growth while staying alert to inflation,” Malhotra said.
Inflation outlook
On the inflation front, the RBI struck a more optimistic note. Supported by a sharp fall in food prices, headline inflation is now expected to average 4 per cent in FY26 – down from the 4.2 per cent projected earlier.
Quarterly CPI projections:
- Q1: 3.6%
- Q2: 3.9%
- Q3: 3.8%
- Q4: 4.4%
“There is greater confidence of durable alignment of inflation with the 4 per cent target over a 12-month horizon,” said Malhotra, adding that risks are now evenly balanced.
Markets react mildly
Markets responded with muted moves. India’s benchmark 10-year bond yield slipped slightly to 6.50 per cent, while the rupee edged down to 86.61 against the US dollar. Equity markets remained cautious.
While the Sensex fell 0.5 per cent to 73,831, the Nifty dropped 0.7 per cent to 22,370.
With geopolitical tensions rising and global rate cut cycles potentially derailed, the RBI’s pivot to a more growth-supportive stance may be timely – though its impact could get muted if trade frictions deepen.
