RBI monetary policy committee decision on April 9, experts say 25 bps repo rate cut possible
The potential rate cut is to counter economic strain from the 26% tariff on Indian imports by the US, which is expected to affect India’s GDP growth this year.
RBI Governor Sanjay Malhotra is expected to announce a 25-basis-point repo rate cut on Wednesday, April 9, according to experts and brokerages.
The potential rate cut is to counter economic strain from the 26 per cent tariff on Indian imports by the US, which is expected to reduce India’s GDP growth this year by 20–40 basis points, Bajaj Broking Research said.
The tariffs could potentially lower the GDP growth to around 6.1 per cent from the RBI’s earlier forecast of 6.7 per cent, pushing the central bank toward further rate cuts, the brokerage added.
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This comes as the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is having its first bi-monthly meeting for this financial year from April 7 to 9. It will announce the final decision tomorrow.
The RBI had previously made a 25-basis-point cut in the repo rate from 6.50 per cent earlier to 6.25 per cent in February.
This cut "has commenced the rate easing cycle,” Axis Securities wrote in its report titled, ‘Q4FY25 Earnings Preview - Banks, Financial Services and Insurance (BFSI).’
The brokerage added that it expects the same 25 bps rate cut and that its initial impact will be "partially visible during the quarter, with the full impact visible from Q1FY26E.”
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Another reason as to why the RBI can potentially cut rates is that liquidity remains tight, particularly for non-bank financial companies (NBFCs) and small businesses that rely on bank credit, according to Sankar Chakraborti, MD & CEO of Acuité Ratings & Research Limited.
“Another rate cut could ease funding constraints, providing a much-needed boost to economic momentum,” he said.
Yet another reason for a cut is inflation showing signs of stability and growth holding firm as of now, according to Bharat Dhawan, Managing Partner at Forvis Mazars in India, though he also expects another rate cut to happen towards the second half of 2025, “especially as the focus gradually shifts toward reviving demand and encouraging investment in a slowing global environment.”
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What were the immediate effects of the US tariffs?
The immediate result of the tariffs were seen in the stock market. Markets rebounded and rallied on Tuesday, a day before the MPC's decision is to be announced. On Monday, it had experienced a severe crash.
The Sensex closed 1,089.18 points in the green or 1.49 per cent up, reaching 74,227.08, while the Nifty was up by 374.25 points or 1.69 per cent in the green, closing at 22,535.85.
On Monday, the story was entirely the opposite. The Sensex closed 2,226.79 points in the red or 2.95 per cent down, reaching 73,137.90, while the Nifty was down by 742.85 points or 3.24 per cent in the red, closing at 22,161.60.
