RBI policy has taken centre stage as global markets are rattled by fresh trade tensions. With the Reserve Bank of India facing mounting pressure from both domestic and international fronts, today’s decision by the Monetary Policy Committee (MPC) was not just a decision about rates – it was a signal of intent for India’s economic direction in 2025.
1. RBI policy cuts repo rate amid growth concerns
The RBI policy cut the repo rate by a much-anticipated 25 basis points, bringing it down from 6.25% to 6%. The move, the second rate cut in 2025, comes in response to sluggish global growth, persistent inflation risks and Donald Trump’s sweeping tariff hikes. The decision is expected to reduce borrowing costs and potentially provide relief to loan borrowers through lower EMIs.
2. Global trade tensions compel RBI
One of the primary drivers behind the RBI policy move is the escalating trade war initiated by the United States. The imposition of 26% tariffs on Indian goods under President Trump’s comprehensive tariff strategy is expected to cut India’s GDP by 20-40 basis points. Although India’s fundamentals remain strong, the impacts caused by global instability are too significant to be ignored, forcing the central bank to act promptly.
3. India’s inflation scenario is under control
RBI’s current policy stance is also influenced by inflation trends. While consumer price index (CPI) inflation is expected to rise marginally in March, the central bank’s forecast for FY2025-26 remains manageable at 4.2% on average. With Q1 inflation pegged at 4.5% and expected to decline further in the next quarters, RBI has some breathing space to prioritise growth without compromising on price stability.
4. Market reactions: Stocks fall, eyes on recovery
Indian stock markets opened in the red ahead of RBI policy announcement. Sensex and Nifty50 witnessed an initial decline, reflecting uncertainty about global sentiment and the direction of interest rates. However, analysts expect the market to stabilise once clarity about policy measures and global trade emerges. A close above 22,800 could revive investor sentiment and signal the return of the “buy on dips” trend.
5. RBI policy to support domestic demand
With GDP growth forecasts cut – Goldman Sachs recently lowered India’s growth outlook to 6.1% from 6.3% – RBI policy is expected to shift from a neutral to an accommodative stance. The focus is now on protecting domestic demand in the face of external shocks. Analysts suggest a total of three rate cuts could follow in 2025 if trade pressures persist.
6. Liquidity reforms under consideration
The central bank is also considering an overhaul of its liquidity management framework. Proposals under review include a shift to a fixed-rate overnight liquidity tool, adopting the Secured Overnight Rupee Rate (SORR) as a benchmark, and potentially lowering the cash reserve ratio (CRR). These changes, if implemented, could ease constraints on Indian lenders and align with RBI’s broader policy objective of stimulating economic activity.
7. Stocks that could benefit from RBI policy
Investors are already adjusting their portfolios in anticipation of rate-sensitive movements. Market expert recommendations include Adani Wilmar, Chambal Fertilizers and CreditAccess Grameen, which are seen as potential beneficiaries of RBI’s latest policy. Lower rates typically boost consumption and credit growth – factors that could favour these stocks in the near future.
Final Conclusion
RBI’s latest policy has laid the groundwork to support India’s economic resilience in a volatile global environment. With inflation under control and growth facing external pressures, the repo rate cut signals a strategic turn towards domestic stimulus. Future moves will depend on how global conditions evolve, but for now, RBI’s policy sends a clear message: growth is the priority.
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