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On April 9, 2025, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) announced a 25 basis point reduction in the repo rate, bringing it down to 6.00%. This marks the second consecutive rate cut under Governor Sanjay Malhotra's leadership, following a similar reduction in February Implications of the Rate Cut: Economic Growth Support: The rate cut aims to stimulate economic growth amid external challenges, notably the recent U.S. tariffs on Indian imports. These tariffs have raised concerns about a potential slowdown in India's GDP growth, prompting the RBI to adopt measures to bolster the economy. Shift to Accommodative Stance: The MPC has changed its policy stance from "neutral" to "accommodative", signaling openness to further rate cuts if necessary to support economic expansion Inflation and Liquidity Considerations: With inflation remaining below the RBI's target—recorded at 3.6% in February—the central bank has room to ease monetary policy without immediate inflationary concerns. Additionally, the RBI has been injecting liquidity into the financial system to ensure adequate credit flow. Impact on Borrowers: For consumers, the reduction in the repo rate is likely to lead to lower borrowing costs, potentially decreasing EMIs on loans and encouraging spending and investment. Market Reactions: Bond Market: India's 10-year bond yield experienced a slight decline to 6.50% following the announcement, reflecting market anticipation of the rate cut. Equity Market: The Nifty 50 and BSE Sensex indices trimmed earlier losses after the rate cut announcement. However, investor sentiment remains cautious due to ongoing global trade tensions and their potential impact on various sectors, including IT and pharmaceuticals.
