The Reserve Bank of India (RBI) has cut interest rates more than expected, reducing the repo rate by 50 basis points to 5.5%. This decision aims to stimulate economic growth amid concerns over US tariffs impacting the country’s outlook. The move marks the third consecutive rate cut and follows recent government data showing India’s economy growing at its slowest pace in four years.
While the January to March quarter showed signs of recovery with annual growth exceeding expectations at 7.4%, analysts remain cautious due to potential risks from US trade policies. Lower inflation has allowed the RBI to focus on growth, with retail inflation dropping to a near six-year low of 3.16% in April.
RBI Governor Sanjay Malhotra emphasized the need to continue stimulating domestic consumption and investment in a challenging global environment. The central bank also reduced the cash reserve ratio by 100 basis points to 3%, enhancing liquidity.
India is not a major industrial power, so US tariffs could affect billions of dollars in exports across various sectors, including gemstones, electronics, and seafood. Negotiations between India and the US are ongoing, with hopes for a trade deal in the near future.
The rate cut reflects the RBI’s efforts to balance supporting economic growth while maintaining price stability amid global uncertainties and trade tensions.
— new from العربي الجديد