The Reserve Bank of India’s Monetary Policy Committee (MPC) has cut the repo rate by 25 basis points to 6%, shifting to an accommodative stance. This decision, backed unanimously, reflects the need to support economic growth amid increasing global uncertainties. With the United States imposing fresh tariffs, including a 26% duty on Indian imports, the risk to global and domestic growth has increased downside risk, likely to weigh on India’s export competitiveness and broader trade sentiment.
Although the inflation outlook is less bleak than a few months ago due to better food price developments, encouraging rabi crop forecasts, and lower crude prices, RBI is still cautious. CPI inflation is projected to stay comfortable, but vigilance regarding price pressures is necessary. Growth is at about 6.5% for real GDP in FY 2025–26, down slightly from our previous estimate due to external factors arising from the global slowdown and trade disruptions. Rural demand remain strong, and urban consumption is recovering, supported by investments and government infrastructure.
