On April 9, 2025, the Reserve Bank of India (RBI) wrapped up its first Monetary Policy Committee (MPC) meeting of the financial year 2025-26, unveiling decisions that signal a bold yet calculated shift in India’s monetary framework. Convened from April 7-9 under Governor Sanjay Malhotra, the meeting delivered a unanimous 25-basis-point repo rate cut, a pivot to an accommodative stance, and revised economic forecasts—moves that underscore the RBI’s agility in addressing global uncertainties while nurturing domestic growth. As India navigates a slowing economy and external trade pressures, this policy update stands out as a masterful blend of pragmatism and ambition, setting the tone for a transformative year ahead.
In This Article:
Repo Rate Cut: A Boost to Growth
The headline outcome was the MPC’s decision to slash the repo rate from 6.25% to 6.00%, marking the second consecutive 25-basis-point reduction in 2025. This follows February’s cut from 6.5%, ending a nearly five-year tightening cycle. The Standing Deposit Facility (SDF) rate now stands at 5.75%, with the Marginal Standing Facility (MSF) rate and Bank Rate at 6.25%. This easing, lowering borrowing costs, aims to spur credit growth and consumer demand—vital as India’s GDP growth dipped to 5.4% in Q2 FY25, the weakest in seven quarters. With retail inflation at 3.61% in February 2025, well within the RBI’s 4% ± 2% target, the MPC seized the moment to invigorate the economy.
Accommodative Stance: Flexibility for the Future
Equally significant was the shift from a “neutral” to an “accommodative” policy stance—the first such change since pre-pandemic times. Governor Malhotra clarified, “Accommodative means we’re open to either holding rates or cutting further, depending on data.” This flexibility positions the RBI to counter emerging risks, notably U.S. President Donald Trump’s reciprocal tariffs, effective April 9, which threaten India’s $125 billion trade with the U.S. Analysts estimate a 20- to 40-basis- point GDP hit in FY26, potentially dragging growth to 6.1%. The stance reassures markets of the RBI’s proactive intent, earning praise from experts like Kotak Mahindra AMC’s Nilesh Shah, who likened it to equipping the economy with “a helmet of liquidity and a bat of lower rates.”
Revised Forecasts: Balancing Realism and Hope
The MPC tempered its FY26 projections, trimming real GDP growth from 6.7% to 6.5%—a nod to global trade disruptions and domestic slowdown—while lowering the CPI inflation forecast from 4.2% to 4.0%, buoyed by softer food and oil prices. This aligns with February’s 3.61% CPI and Bank of Baroda’s 4.1% estimate for March. Favorable monsoons and a cooling commodity market have eased inflationary pressures, giving the RBI room to prioritize growth. Despite the downgrade, the 6.5% forecast exceeds some private estimates (e.g., SBICAPS at 6%), reflecting cautious optimism rooted in resilient services and recovering consumption.
Context: Global Headwinds, Domestic Strength
The timing of this policy shift is striking. As U.S. tariffs kicked in, global trade tensions escalated, yet the RBI leaned on domestic levers—liquidity injections of ₹1.5 lakh crore since December 2024, including a 50-basis-point CRR cut to 4%, and a robust services sector—to cushion the blow. X posts from analysts like
@marketreader_ hailed the decision as a “strategic masterstroke,” highlighting the RBI’s focus on internal resilience amid external volatility.
Market Cheers, Future Outlook
Markets are poised to rally, with financials and infrastructure stocks tipped to lead gains. Anand Rathi Group predicts Nifty and Bank Nifty targets of 25,500 and 52,300, respectively. Experts forecast a shallow easing cycle—75-100 basis points by FY26—potentially dropping the repo rate to 5.5%-5.75%. Challenges like a weakening rupee and energy price risks linger, but the RBI’s toolkit, including OMO purchases and UPI enhancements, signals readiness. The April 2025 MPC meeting is a defining moment—a testament to Governor Malhotra’s leadership in steering India through uncertainty with vision and precision.
-By Manoj H
