In a bid to shield the Indian economy from mounting global headwinds, the Reserve Bank of India (RBI) on Wednesday announced a 25 basis point cut in the repo rate, bringing it down from 6.25% to 6.00%. This marks the second consecutive rate cut by the central bank in the current year, aiming to provide relief to borrowers and stimulate domestic demand.
The move was unveiled in the RBI’s first monetary policy statement for FY26, against the backdrop of rising concerns over a global slowdown sparked by recent US tariff hikes. These protectionist measures have led to widespread economic anxieties, particularly in emerging markets like India.
RBI Governor Sanjay Malhotra, in his address, acknowledged the gravity of the situation. “The global economic outlook is fast changing. The recent trade tariff related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation,” he said.
He further added, “Amidst this turbulence, the US dollar has weakened appreciably; bond yields have softened significantly; equity markets are correcting; and crude oil prices have fallen to their lowest in over three years.”
The central bank’s decision comes after its February policy review, when it had lowered the benchmark rate for the first time in nearly five years. With Wednesday’s cut, the RBI has signaled a clear pivot towards monetary easing to counterbalance external shocks.
In addition to the rate revision, the RBI also downgraded India’s GDP growth forecast for FY26 to 6.5%, down from its earlier estimate of 6.7%, citing escalating global volatility and trade uncertainties as key risk factors.
“The new fiscal year has begun on an anxious note,” Malhotra remarked, underlining the need for proactive monetary measures to cushion the economy from external stressors.
With the repo rate now at its lowest since early 2020, the rate cut is expected to ease loan EMIs for home, car, and personal borrowers, offering some financial breathing room to consumers and small businesses alike.
