Mumbai, April 7, 2025 – The Reserve Bank of India (RBI) kicked off its three-day Monetary Policy Committee (MPC) meeting today, April 7, with the outcome slated for announcement on April 9. Chaired by Governor Sanjay Malhotra, the six-member panel is deliberating key monetary policy decisions against a backdrop of softening inflation, a slowing domestic economy, and escalating global trade tensions. Market watchers and analysts widely expect a 25-basis-point cut in the repo rate, currently at 6.25%, which could lower borrowing costs for businesses and spur investment amid uncertain economic conditions.
The meeting comes at a critical juncture. India’s retail inflation, measured by the Consumer Price Index (CPI), has been trending downward, with forecasts suggesting it could ease to 4.7% for FY25, according to India Ratings and Research (Ind-Ra). This follows a decline to 4.8% in FY24-25, bolstered by favorable food price outlooks and a robust rabi crop. Meanwhile, economic growth has shown signs of moderation, with GDP growth for FY25 projected at 6.4%, the slowest in four years, prompting calls for monetary easing to support demand. The external environment adds further complexity, as U.S. President Donald Trump’s tariff hikes and China’s retaliatory measures have rattled global markets, contributing to a sharp sell-off in Indian equities today—the BSE Sensex dropped over 3,200 points to 72,150.
Analysts see a compelling case for a rate cut. SBI Research, in a report released today, advocated for a 25-basis-point reduction, projecting a cumulative cut of up to 100 basis points over the current easing cycle. “Domestic economic slowdown, low inflation outlook due to falling oil and commodity prices, a current account surplus, and rupee appreciation against the dollar provide significant headroom for the RBI to act,” the report noted. Posts on X echo this sentiment, with users citing high real interest rates and a benign inflation environment as reasons for a potential 50-basis-point cut, though a 25-basis-point move remains the consensus expectation.
The repo rate, last adjusted in February 2025 from 6.5% to 6.25%, has been a focal point for businesses and investors. A cut would reduce the cost of borrowing, potentially boosting corporate investment and consumer spending, particularly in sectors like real estate and manufacturing. However, the RBI’s decision is not without risks. Global uncertainties, including volatile commodity prices and a strengthening U.S. dollar, could pressure the rupee and imported inflation. Governor Malhotra, in his February policy statement, emphasized a “neutral” stance to balance growth and inflation, a position the MPC may refine this week.
The broader context includes the RBI’s recent liquidity measures—₹1.5 lakh crore injected into the banking system in January and a 50-basis-point cash reserve ratio cut in December 2024—indicating a proactive approach to supporting growth. With foreign exchange reserves at $630.6 billion as of January 31, providing over 10 months of import cover, India’s external sector remains resilient, offering the MPC additional flexibility.
Market reactions have been mixed as the meeting began. The Nifty 50 fell 3.5% to 21,750 amid global sell-off fears, though banking stocks showed resilience on hopes of a rate cut. Analysts from HSBC and Motilal Oswal suggest that a 25-basis-point reduction could stabilize sentiment, with some forecasting a shallow easing cycle extending into FY26, potentially lowering the repo rate to 5.5% by year-end.
As the MPC deliberates, all eyes are on April 9, when Governor Malhotra will unveil the decision at 10:00 AM IST, followed by a press conference at noon. Whether the RBI opts for a cut or holds steady, the outcome will shape India’s economic trajectory amid a challenging global landscape. For now, businesses and investors await clarity on how the central bank will navigate this delicate balance.
