RBI cuts repo by 25bps as tariffs cloud growth view

MPC cuts growth, inflation forecasts by 20 bps, shifts stance to accommodation

- Gopika Gopakumar

The Reserve Bank of India (RBI) is concerned about the impact of the ongoing tariff war, governor Sanjay Malhotra said, on a day it reduced the benchmark lending rate and eased its monetary policy stance.

India may grow slower than previously expected this fiscal year, the central bank's monetary policy committee (MPC) said, at a time the world is bracing for a slowdown resulting from trade tensions. The committee shifted gears to support growth with a 25-basis-point repo rate cut and change in policy stance to accommodative, as inflation risks recede and the US tariffs trigger global uncertainties.

"We have reduced the growth rate (outlook) by 20 basis points (bps) this year primarily arising out of the uncertainties," Malhotra said at a press conference. "All in all, more than inflation, we are concerned about its impact on growth," he said. Tariffs were expected to impact India's goods exports, but India was relatively better placed than some other countries, he added.

While the unanimous decision to cut repo rate to 6% was expected, the change in policy stance came as a surprise.

Only three out of 10 economists polled by Mint expected a change in policy stance to 'accommodative' from 'neutral'. An accommodative stance indicates the central bank is ready to support growth by cutting rates.