(The RBI has slashed interest rates and lowered India’s GDP growth forecast for 2025, citing global uncertainty and domestic economic challenges.)
RBI Cuts Interest Rate, Trims India’s GDP Forecast for 2025
New Delhi, April 10, 2025:
In a significant policy shift, the Reserve Bank of India (RBI) cut the benchmark interest rate by 25 basis points on Thursday and revised India’s GDP growth forecast downward for FY 2025. The move reflects the central bank’s concern over slowing economic momentum and rising global uncertainties.
The decision was announced following the first bi-monthly monetary policy review of the fiscal year. RBI Governor Shaktikanta Das highlighted a mix of global headwinds, sluggish consumer demand, and inflationary concerns as key reasons behind the policy recalibration.
📉 Key Announcements by RBI
- Repo Rate: Cut by 25 basis points to 6.25%
- GDP Growth Forecast (FY25): Revised down from 6.8% to 6.4%
- Inflation Projection: Raised slightly to 5.3%
- Policy Stance: Shifted from “withdrawal of accommodation” to “neutral”
Why Did RBI Cut the Interest Rate?
The RBI’s move is primarily driven by a combination of domestic and international pressures:
- Slowing Industrial Output: India’s IIP (Index of Industrial Production) has seen marginal growth in recent quarters.
- Muted Consumer Demand: Retail sales and credit growth have remained below expectations.
- Global Economic Slowdown: The World Bank recently trimmed its global growth outlook for 2025.
- Geopolitical Risks: The ongoing conflicts in the Middle East and supply chain disruptions continue to impact global trade and prices.
Governor Das said, “Our policy decision aims to stimulate domestic demand while keeping inflation within target. Flexibility remains key in this evolving global landscape.”
Impact on the Indian Economy
🔻Lower Borrowing Costs
A rate cut generally results in cheaper loans for consumers and businesses. This could boost:
- Home loan and auto loan demand
- Business investments and capital expenditure
- Consumption across rural and urban sectors
However, the full transmission of rate cuts by banks may take a few months.
📉 GDP Forecast Downgrade
The revised GDP forecast reflects:
- Lagging private consumption
- Delayed public infrastructure projects
- Agricultural distress in several states due to unseasonal rains
According to the Economic Survey 2025, structural reforms and targeted fiscal support will be key to reviving momentum in the second half of the year.
Expert Insights
📊 Economist Reactions
Dr. Radhika Mehta, Economist at HDFC Bank:
“The rate cut was expected. However, the sharp downgrade in the growth forecast signals deeper structural weaknesses. More fiscal support may be required.”
Abhishek Kumar, Policy Analyst, Brookings India:
“RBI’s neutral stance gives it room for maneuvering depending on future inflation prints. For now, this is a cautious but necessary step.”
RBI’s Policy: A Balancing Act
The RBI finds itself balancing two contrasting forces:
| Positive Factors | Negative Factors |
|---|---|
| Strong forex reserves | Global economic slowdown |
| Moderate fiscal deficit | Elevated crude oil prices |
| Tech & startup sector growth | Weak rural consumption |
What’s Next for Markets and Borrowers?
- Stock Market: BSE Sensex and Nifty 50 initially surged but later pared gains as investors digested the GDP downgrade.
- Bond Yields: 10-year government bond yields fell by 12 basis points to 6.85%.
- Rupee Movement: INR remained stable at ₹83.10 per USD post-announcement.
Borrowers can expect lower EMIs in the coming months, especially for floating-rate loans. Banks may soon revise their lending rates in response to RBI’s move.
You can read the full RBI monetary policy statement on the official RBI website.
❓ Frequently Asked Questions (FAQs)
1. Why did Reserve Bank of India reduce the interest rate in April 2025?
The RBI cut the repo rate by 25 bps to stimulate slowing domestic demand and counter global economic uncertainty.
2. What is the new GDP growth forecast for India in 2025?
India’s GDP growth forecast for FY25 has been revised from 6.8% to 6.4%.
3. How will the rate cut affect loans and EMIs?
A lower repo rate may lead banks to cut interest rates, reducing EMIs on home, auto, and business loans.
4. What sectors will benefit most from the rate cut?
Real estate, automobile, infrastructure, and MSME sectors are likely to benefit from reduced borrowing costs.
5. Will RBI cut rates again in 2025?
The RBI has adopted a neutral stance, indicating future rate decisions will depend on inflation data and economic conditions.
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