India’s central bank, the Reserve Bank of India (RBI), has cut interest rates for the second time this year to boost a slowing economy grappling with the impact of US President Donald Trump’s tariffs. The benchmark repo rate, at which the RBI lends to commercial banks, has been reduced by 25 basis points to 6 percent.
The RBI’s decision to cut interest rates is a proactive measure to stimulate India’s slowing economy. The country’s economy has been growing at a slower pace in recent quarters, with a growth rate of 5.8 percent in the fourth quarter of 2023. The RBI aims to support growth and control inflation, which has been easing in recent months.
India’s central bank cut interest rates in the world’s fifth-largest economy on Wednesday. This happened as US President Donald Trump’s tariffs kicked in. Policymakers warned of “challenging global economic conditions”.
The US tariffs, which came into effect recently, are expected to hurt Indian exports, including gems, jewelry, and seafood. The tariffs are part of Trump’s protectionist trade policies. These policies have raised concerns about the impact on global trade and economic growth.
The RBI’s monetary policy committee (MPC) noted the reasons for cutting interest rates. They highlighted “challenging global economic conditions.” They also mentioned “exacerbated uncertainties” due to trade tariff-related measures. The MPC also downgraded its GDP growth projection for the current financial year from 6.7 percent to 6.5 percent.
Experts expect further rate cuts, citing uncertainty around US trade policy and contained inflation. The RBI made the decision to cut interest rates. It is a proactive measure to support India’s economy amid global economic uncertainty.
India and the US are negotiating a bilateral trade agreement, which is expected to boost trade between the two countries. The first tranche of the agreement is expected to be finalized by autumn.
The RBI’s decision to cut interest rates is a significant move to stimulate India’s slowing economy. The impact of Trump’s tariffs on Indian exports and the global economy will be closely watched in the coming months.
The RBI’s interest rate cut is a proactive measure to support India’s economy amid global economic uncertainty. The outcome of the bilateral trade agreement between India and the US will be crucial in determining the future of India’s economy.