Context : The Reserve Bank of India, amid global trade tensions and slowing domestic demand, cut the repo rate by 0.25% to 6%. It also revised the GDP growth forecast downward from 6.7% to 6.5%, signaling a shift to a more accommodative policy stance.
Relevance : GS 3(Economy )
Repo Rate Cut:
- Repo rate reduced by 25 basis points (bps) from 6.25% to 6%.
- This marks the second consecutive rate cut of 25 bps by the RBI.
- Decision was unanimous by the Monetary Policy Committee (MPC).
Shift in Policy Stance:
- Stance shifted from “neutral” to “accommodative”.
- Signals RBI’s priority is reviving growth rather than controlling inflation.
- Opens the door for possible future rate cuts.
GDP Growth Forecast Lowered:
- RBI revised India’s GDP growth forecast from 6.7% to 6.5%.
- Reflects concerns about slowing domestic and global economic activity.
Global Trade War Impact:
- Escalation in U.S.-China trade tensions cited as a major concern.
- Higher tariffs are expected to hurt India’s export sector.
- Global slowdown affecting business confidence and investment decisions.
Impact on Borrowers & Depositors:
- Positive for borrowers: Lower interest burden on home, auto, and personal loans.
- Negative for savers: Likely decline in interest income on deposits.
RBI Governor’s Remarks (Sanjay Malhotra):
- Trade war creates uncertainty, affecting investment and spending.
- External slowdown and tariff impacts will dampen India’s growth.
- Current policy aims at stimulating economic activity.
