India’s central bank has cut interest rates by 0.25 percentage points, citing growing concerns over the global economic impact of US President Donald Trump’s new tariffs.

The Reserve Bank of India (RBI) reduced its key repo rate — the rate at which it lends to commercial banks — from 6.25% to 6%, marking its second rate cut this year after a five-year pause.

Alongside the rate cut, the RBI revised India’s growth forecast downward from 6.7% to 6.5% for the current fiscal year, with a similar projection for the next.

Crucially, the central bank also shifted its policy stance from “neutral” to “accommodative,” signaling greater willingness to ease rates further to support a slowing economy.

RBI Governor Sanjay Malhotra said the escalation in global trade tensions was becoming a serious threat. “Concerns over trade disputes are materialising and disrupting global sentiment,” he said.

Economists now expect further rate cuts, with some predicting up to a full percentage point of easing amid ongoing global uncertainty. ICICI Bank noted that falling inflation gives the RBI more flexibility to act.

HSBC estimates that India’s GDP could be reduced by up to 0.5% this year due to declining exports and weaker capital inflows caused by the tariff fallout.

India’s room to boost growth through fiscal stimulus is limited, as government revenue and spending momentum have both declined in recent months, HSBC added.

From Wednesday, Indian exports to the US will face new tariffs of up to 27% — still lower than the 104% on Chinese goods, and 46%-49% on items from Vietnam and Cambodia.

India is currently pursuing a bilateral trade deal with the US to mitigate the damage, but analysts warn that a global slowdown could still dent demand for Indian exports, even if a deal is reached.

Source: BBC

BDST: 1231 HRS, APR 09, 2025
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