The Reserve Bank of India has reduced the repo rate to 6%, its second cut this year, promising lower EMIs for borrowers. The move comes amid US-India trade tensions and a cautious global economic outlook.
RBI Cuts Repo Rate to 6% Amid Trump Tariffs Cheaper Loans, Global Concerns Loom
In a significant move aimed at spurring domestic growth and easing borrowing costs, the Reserve Bank of India (RBI) has reduced the key repo rate by 25 basis points, bringing it down to 6%. This is the second rate cut in 2025, following a previous reduction to 6.25% in February.
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The decision by the Monetary Policy Committee (MPC) was unanimous, with RBI Governor Sanjay Malhotra emphasizing the need to support economic growth in the face of escalating global trade tensions, particularly following new tariffs imposed by the Donald Trump administration on Indian exports.
What the Repo Rate Cut Means for You
The repo rate—the interest rate at which the RBI lends money to commercial banks—is a crucial tool for controlling liquidity, inflation, and economic growth. A reduction in this rate generally leads banks to lower their lending rates, making home loans, car loans, and personal loans cheaper for consumers.
“This move will directly ease the burden on borrowers by reducing EMIs and making credit more affordable,” said a senior official from the RBI during the policy announcement.
Context: Global Trade Worries and Domestic Priorities
The rate cut comes at a time when the global economy is grappling with uncertainty. The US has imposed reciprocal tariffs on several Indian goods, raising fears of a trade war that could dent India’s export performance.
“The dent on global growth due to trade frictions will impede domestic growth. Higher tariffs may impact net exports,” Governor Malhotra said.
Despite these headwinds, the RBI maintained an optimistic outlook on India’s core economic sectors. Agriculture prospects remain strong, and manufacturing is showing early signs of recovery. The services sector continues to perform robustly, driven by urban consumption and rising discretionary spending.
Inflation Under Control, Growth Outlook Adjusted
One of the key factors behind the rate cut was low inflation, especially a steep decline in food prices, which has kept overall inflation below the RBI’s target of 4%.
However, in light of global developments, the RBI has trimmed its GDP growth projection for FY2025 by 20 basis points, revising it to 6.5%, down from the earlier forecast of 6.7%.
“While it’s too early to quantify the impact of global challenges, the RBI remains confident in managing domestic growth,” Malhotra stated.
Impact on Real Estate and Housing Sector
The cut in interest rates is expected to boost the real estate sector, especially affordable and mid-income housing segments, which are highly sensitive to borrowing costs.
According to a recent report by Knight Frank India, a 25-bps rate cut could lead to a 2-4% increase in housing sales in the upcoming quarter, driven by renewed consumer interest due to lower EMIs.
Source: Knight Frank India Housing Market Report
What Lies Ahead
The RBI’s move reflects a balanced strategy—stimulating domestic growth while navigating geopolitical and economic uncertainties. With India-US trade relations under pressure and potential global slowdowns, the central bank’s accommodative stance is a proactive effort to sustain momentum.
The market is expected to react positively in the short term, especially in consumer lending, real estate, and automobile sectors.
The RBI’s latest rate cut to 6% is a clear signal of its commitment to reviving growth without stoking inflation, even as it remains alert to global risks. With lower EMIs on the horizon, Indian consumers and businesses alike can expect some relief in the months ahead, although much will depend on how global trade dynamics unfold.
As Governor Malhotra summarized, “We are proactively managing the situation and are confident in our ability to navigate the economic challenges ahead.”
Key Highlights:
- Repo rate cut: 25 bps, now at 6%
- GDP forecast revised: 6.5% for FY2025
- Inflation: Below target, mainly due to falling food prices
- Trump tariffs: Potential drag on exports, adds to global uncertainty
- Cheaper loans: Home, auto, and personal loans to become more affordable
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Last Updated on: Wednesday, April 9, 2025 7:25 pm by Rahul Chourasia | Published by: Rahul Chourasia on Wednesday, April 9, 2025 7:25 pm | News Categories: News
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