Agency. India’s central bank on Friday cut interest rates higher than expected, citing the need to boost economic growth amid concerns over sluggish inflation and the impact of US taxes. The Reserve Bank of India (RBI) has reduced the main repo rate for lending to commercial banks by 50 basis points to 5.5 percent.
Most analysts had expected a shortfall of 25 basis points. The cuts were the third in a row and came a week after India’s economy expanded at its slowest pace in four years in the financial year ended March.
While the January-March quarter showed signs of recovery, us President Donald Trump’s broader tariffs, a better-than-expected 7.4 per cent annual growth, pose risks to the outlook, analysts said. It has allowed the RBI to focus on growth to allay price concerns. Retail inflation fell to a six-year low of 3.16 per cent in April.
Rbi Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) felt it was “imperative” to continue to stimulate “domestic consumption and investment” through policy instruments to boost growth. For the first time in nearly five years, the RBI cut rates in February and then another cut in April.
The Government of India has forecast above average monsoon rainfall. This, according to observers, should help growth as higher agricultural production will support the rural economy and keep vegetable prices stable. But Trump’s protectionist policies could increase the pressure on growth. While New Delhi is not a powerful manufacturing hub, experts say us customs duties will hurt billions of dollars in Indian exports in various sectors, including electronics, gems and jewellery and seafood.
India is working on the first phase of the trade deal with Washington and negotiators have visited several times in the last three months. New Delhi is seeking greater access to labour-intensive exports such as textiles and shoes at a time when the White House is pressuring India to reduce taxes on various products, including agricultural products and automobiles, local media reports said.
Us Commerce Secretary Howard Lutnick said this week that a trade deal between the two countries was expected “in the near future”.
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