The Reserve Bank of India (RBI) is set to announce its first monetary policy decision for the fiscal year 2025-26 today, April 9, 2025. This decision comes at a critical juncture, as the global economic landscape faces new challenges due to recent tariff escalations by U.S. President Donald Trump. The U.S. administration has imposed a 26% tariff on Indian imports, raising concerns about potential impacts on India’s economic growth.
RBI MPC 2025: Will India Slash Rates to Protect GDP from US Tariff Shock?
In response to these developments, the RBI’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, is widely anticipated to implement a 25 basis point reduction in the repo rate, bringing it down to 6%. Such a move aims to stimulate economic activity and mitigate the adverse effects of external trade pressures.
Background on Recent Economic Measures:
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February 2025 Rate Cut: In its previous policy review, the RBI reduced the benchmark repo rate by 25 basis points to 6.25%, marking the first rate cut in nearly five years.
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Inflation Trends: India’s inflation has been moderating, providing the central bank with the flexibility to adjust interest rates to support growth.
Impact of U.S. Tariffs:
The recent 26% tariff imposed by the U.S. on Indian imports is expected to have a modest impact on India’s GDP, with estimates suggesting a reduction of 20-50 basis points. Despite this, the GDP growth forecast remains at 6.7% for the current fiscal year.
Market Expectations:
Economists and market analysts are closely monitoring the RBI’s policy stance. A shift from a ‘neutral’ to an ‘accommodative’ stance is anticipated, signaling the central bank’s readiness to support economic growth amidst global trade tensions.
Conclusion:
As the RBI navigates these complex economic dynamics, today’s policy announcement will be pivotal in shaping India’s economic trajectory in the face of escalating global trade challenges.
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