RBI Revises GDP Growth Outlook and Cuts Repo Rate Amid Rising Global Trade Tensions

GDP Growth Outlook Lowered

In its first monetary policy meeting for the financial year 2025-26 (FY26), held on April 9, the Reserve Bank of India (RBI), under Governor Sanjay Malhotra, revised India’s real GDP growth forecast to 6.5%, down from the earlier projection of 6.7%. This revision comes in the wake of increasing global trade uncertainty, following the reimposition of tariffs by U.S. President Donald Trump.

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Quarterly Growth Projections Reflect Global Headwinds

The central bank adjusted its quarterly GDP projections as follows:

• Q1 FY26: 6.5% (earlier 6.7%)
• Q2 FY26: 6.7% (earlier 7.0%)
• Q3 FY26: 6.6% (earlier 6.5%)
• Q4 FY26: 6.3% (earlier 6.5%)

Global Trade Tensions Drive Policy Shift

Governor Malhotra remarked that the global economic landscape is rapidly changing, with tariff-related disruptions worsening the outlook for both global and domestic economies. He noted that uncertainties surrounding trade policies are impacting supply chains, inflation expectations, and business sentiment.

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RBI Cuts Repo Rate by 25 Basis Points

To support domestic economic activity, the Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 6%, marking the second consecutive reduction after February 2025’s cut to 6.25%. The central bank also shifted its monetary stance from “neutral” to “accommodative”, allowing more room to address slowing growth

Policy Easing to Benefit Borrowers

This rate cut is expected to provide relief to borrowers, lowering EMIs for home, auto, and corporate loans. It also aims to boost private consumption and investment at a time when external demand and exports may face pressure due to trade restrictions.

India’s Economic Resilience Acknowledged

Despite the downgrade in growth, the RBI acknowledged the strength in India’s rural economy, industrial recovery, and resilience in services. These sectors are expected to provide some cushion against external shocks, although global trade disruptions remain a key downside risk.

Key Dates Ahead

• MPC Meeting Minutes Release: April 23, 2025
• Next MPC Meeting: June 4–6, 2025

Conclusion

The RBI’s policy decisions underscore a careful balance between supporting domestic growth and mitigating risks from global trade developments. The accommodative stance and rate cuts reflect a proactive approach aimed at ensuring macroeconomic stability in a period of rising global volatility.

Also Read: Global Markets on Edge: Trump’s Tariffs Spark Fears of ‘Black Monday 2.0’