In a significant move, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on April 9, 2025, slashed the repo rate by 25 basis points to 6%, signaling a pivot toward supporting economic growth amid easing inflation and rising global trade tensions.
This decision marks the first policy action of the new financial year and comes as headline inflation has shown signs of cooling. The central bank also shifted its policy stance from ‘neutral’ to ‘accommodative’, reflecting a broader strategy to boost domestic demand in a challenging international environment.
RBI Governor Sanjay Malhotra emphasized the bank’s growing concern about the potential impact of rising US tariffs and trade disruptions on India’s growth trajectory. He reiterated that while inflation remains on track, external risks pose a significant threat to economic momentum.
The revised policy rates are as follows: the Standing Deposit Facility (SDF) is now at 5.75%, while the Marginal Standing Facility (MSF) rate and the Bank Rate have both been adjusted to 6.25%.
Real GDP for FY26 has been projected at 6.5%, with quarterly projections at Q1: 6.5%, Q2: 6.7%, Q3: 6.6%, and Q4: 6.3%, reflecting a cautiously optimistic outlook. Inflation, on the other hand, has been forecasted at 4% for FY26, down from 4.2% in February, with quarterly forecasts between 3.6% and 4.4%.
The RBI holds six bi-monthly policy meetings every financial year. The remaining meetings for FY26 are scheduled for June 4–6, August 5–7, September 29–October 1, December 3–5, and February 4–6.
Industry leaders responded positively to the rate cut and policy shift. Kishore Lodha, CFO of UGRO Capital, welcomed the change, noting that the accommodative stance aligns with the RBI’s recent liquidity-enhancing measures. He emphasized the significance of extending co-lending arrangements to all regulated entities, a move expected to boost credit flow across sectors.
Sanjay Dutt, MD and CEO of Tata Realty, called the decision a “game-changer” for the real estate sector, particularly for mid-income buyers sensitive to interest rates. He stated that the reduction in borrowing costs could stimulate housing demand, especially amid ongoing global headwinds and domestic market shifts.
Ashwani Dhanawat of Shriram General Insurance highlighted the strategic timing of the rate cut, suggesting it is designed to counteract the economic drag from the escalating global tariff war. He stressed the importance of continued policy vigilance to ensure inflation remains in check while investment and consumption rebound.
Analysts believe that the RBI’s bold step could boost credit growth, lower EMIs for borrowers, and revitalize private investment, but caution that much depends on how banks transmit these rate cuts amid tight operating margins.
Financial markets responded positively to the announcement, with both bond yields and equity indices showing moderate gains as investors priced in expectations of improved liquidity and domestic consumption.
Experts also flagged that the RBI’s decision appears to be laying the groundwork for a more growth-oriented monetary regime, possibly heralding a cycle of gradual rate cuts if inflation remains within target.
Economists, however, remain split on the long-term efficacy of the move. Some warn that if global commodity prices spike or tariffs rise further, inflationary pressures could return, forcing a recalibration of the RBI’s approach.
In summary, the RBI’s April 2025 policy decision represents a turning point — shifting focus toward nurturing economic expansion in the face of global uncertainty, while maintaining a cautious eye on inflation and fiscal health.
With its stance now firmly accommodative, all eyes will be on upcoming data and the next MPC meeting in June to see whether this pivot can successfully balance growth ambitions with macroeconomic stability.
