RBI Reduces Repo Rate to 6%, Shifts to Accommodative Stance Amid Global Pressures

The Reserve Bank of India's Monetary Policy Committee (MPC) has cut the repo rate by 25 basis points, lowering it to 6%, as part of its first bi-monthly review for FY2025–26. The decision was taken unanimously, reflecting a strong consensus among members on the need to respond to emerging economic challenges.

In a significant policy shift, the MPC also changed its monetary stance from neutral to accommodative, indicating a willingness to support economic growth through further easing if required.

RBI kicks off FY25 with its first monetary policy meet, led by Governor Sanjay Malhotra.

Back-to-Back Rate Cuts Show Proactive Approach

This marks the second consecutive reduction in the repo rate by the MPC, pointing to a strategic move to stimulate the economy amidst uncertain global conditions and growing external risks. With inflation still within manageable levels, the central bank has opted to prioritize growth revival.

Monetary Policy Adjusted for Economic Headwinds

Rising concerns over international trade disruptions—particularly due to the deepening tariff tensions between the U.S. and China—have contributed to a cautious economic outlook worldwide. Combined with a recent downward revision of India’s GDP forecast, the RBI’s actions reflect a preemptive effort to soften potential domestic impacts.

The accommodative stance allows greater flexibility for future rate cuts and liquidity measures, signaling that the central bank is prepared to respond if growth weakens further.

Global Conditions and Domestic Slowdown Shape Strategy

The repo rate cut is intended to encourage borrowing, stimulate private investment, and drive consumer demand at a time when industrial activity and exports are underperforming. The shift in monetary posture aligns with broader concerns about sustaining momentum in a volatile economic environment.

Forward Outlook

With this move, the RBI is positioning itself to cushion the Indian economy against both internal and external shocks. Analysts expect the central bank to maintain its accommodative stance in the short term, while closely monitoring inflation trends, geopolitical developments, and global financial market behavior.