India’s central bank cuts policy rate by 25 bps to 6% amid growth concerns

April 09, 2025 (MLN): India’s central bank cut its policy rate by 25 basis points to 6%, marking its lowest level since September 2022 as growth concerns mount in the world’s fifth-largest economy.

In its monetary policy statement, the RBI noted that tariffs have increased uncertainties, clouding the economic outlook across regions, posing new headwinds for global growth and inflation.

The move from the Reserve Bank of India comes amid softening inflation, but also a slowing economy, as per CNBC.

The RBI explained the rate cut was because of a “decisive improvement” in the inflation outlook, adding that there is greater confidence that inflation will align with its 4% target over the next 12 months.

“On the other hand, impeded by a challenging global environment, growth is still on a recovery path after an underwhelming performance in the first half of 2024-25,” the statement said.

The bank’s fiscal first half runs from April to September 2024.

The rate cut was in line with expectations from analysts polled by Reuters and comes as the U.S.′ reciprocal tariffs kicked in at midnight stateside with a 26% levy slapped on goods coming in from India.

More recently, India’s GDP expanded by a weaker-than-expected 6.2% in the fourth quarter of 2024, and the country’s economy is estimated to grow 6.5% in the financial year to March 2025 — a sharp slowdown from 9.2% the year before.

A note from HSBC on April 7 predicted that the announced tariffs will directly shave off 0.5 percentage points from India’s full-year growth for the financial year ending March 2026.

It added that there could be indirect and second-order impacts from factors, including slower export volumes and weaker foreign direct investment flows.

Sanjay Mathur, chief economist for Southeast Asia and India at ANZ, told CNBC on April 3 that there are “definitely” downside risks to India’s GDP growth, saying that a GDP growth figure “below 6% is not impossible at this stage, given the shocks to the global system.”

Mathur also noted that there is a heat wave in India, which would disturb the country’s agricultural output. Agriculture is a key part of the country’s GDP, making up 18% of its economy.

Inflation most recently came in at a lower-than-expected 3.61% in February as vegetable prices cooled and were at their lowest level since July 2024.

The RBI had estimated a full-year inflation figure of 4% for its coming financial year ending March 2026, CNBC further added.

Separately, HSBC estimated that inflation will average approximately 3.5% over the next six months, led by lower food prices.

“Core inflation, too, will likely remain soft, led by the recent appreciation of the rupee, imported disinflation from China, softer oil prices, and weaker domestic growth,” HSBC added.

Copyright Mettis Link News