RBI Repo Rate Cut: Key Announcements on GDP, Inflation & Global Tariffs

The Reserve Bank of India today, under the New RBI governor, has cut the Repo Rate by 0.25 bps from 6.25 percent to 6.00 percent following the three-day six-member meeting that started on April 7. This marks the second consecutive rate cut under Governor Malhotra.  

The policy stance was also changed from Neutral to accommodative, which means that the Central Bank is prepared to expand the money supply to boost the growth of economy, and the Central Bank is willing to cut the interest rates further if approved by the members.

GDP FORECAST

The GDP forecast was revised downwards for this fiscal year from 6.7 percent to the current forecast of 6.5 percent.  Governor Sanjay Malhotra said that the growth projection has been decreased by 0.20 bps primarily because of global trade and policy uncertainties around the world.

From previous economic growth of 6.5 percent, 6.7 percent, 6.6 percent, and 6.3 percent for Q1, Q2, Q3, and Q,4 respectively for Financial Year 25-26. RBI has given new forecasts for previous growth at 6.7 percent, 7 percent, 6.5 percent, and again, 6.5 percent for the same period.

INFLATION FORECAST

In the February meeting, RBI had projected the Inflation to be around 4.2 percent. However, the new forecast for inflation now stands at 4 percent, citing the global uncertainties that the whole world is currently facing.  

The Inflation forecast for FY26 stood at 3.6 percent, 3.9 percent, 3.8 percent, and 4.4 percent for Q1, Q2, Q3, and Q4, respectively. They further said that the inflation is currently under the target, largely supported by a fall in food prices.  

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TARIFF IMPACTS 

The RBI Governor stated that the Quantification of the impact of global developments on growth is currently difficult, referring to tariffs placed on by the U.S. He further stated that the global economic outlook is fast changing and the recent tariffs have worsened the situation, even clouding the economic outlook across the world and posing new headwinds. 

MARKET REACTION

The market’s reaction to the rate cut was muted as it was already expected by the market participants that RBI would cut the Repo rates by at least 0.25 basis points. However, the participants were mostly focused on the stance and the comments made by the RBI.

Nifty 50 traded flat at 0.50 percent below the previous close; similarly, Nifty Bank traded flat at 0.65 percent below the previous close. Nifty FMCG stood at the top gainers and Nfty IT as top losers among sectoral Indices.

Written By Abhishek Das

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