RBI's Rate Cut To Cushion Economy Amidst Global Turmoil: India Inc

The Reserve Bank of India on Wednesday cut its benchmark repo rate by 25 basis points to 6%, offering relief to borrowers of home, auto, and corporate loans. This marks the second consecutive rate reduction by the central bank.

Industry bodies welcomed the move, stating it would help shield the Indian economy from external shocks, especially amid rising global uncertainties triggered by reciprocal tariffs imposed by the United States. They believe the rate cut will provide a cushion against the impact of the ongoing trade tensions and support domestic economic growth.

The decision to continue with the rate easing cycle is as timely and prudent as termed by CII Director General Chandrajit Banerjee. "The rate cut coupled with the shift in monetary policy stance from 'neutral' to 'accommodative', too, is a big positive," said Banerjee.

The RBI's rate cut and stance change reflect concerns about the impact of slower global growth on the domestic economy and a relatively benign outlook for domestic inflation, Banerjee further shared.

CII is of the view that RBI's accommodative monetary policy combined with the government's growth-centric fiscal policy will help boost domestic growth amidst global economic turmoil, Banerjee added.

MPC's decision to reduce the repo rate to 6% and adopt an accommodative stance will provide a cushion to the Indian economy from adverse effects of global economic uncertainty while at the same time boosting economic growth, said Hemant Jain, president, PHDCCI.

The relaxation in income taxes announced during Budget 2025-26, along with the reduction in interest rates, will improve consumer sentiment, which will accelerate GDP growth via an uptick in private final consumption expenditure, he said.

On the industry front, reduction of the policy rate will lower debt servicing costs, providing extra cushion to the industry to absorb the external shocks, such as the US tariff announcements recently, added Jain.

Buoyed by a strong seasonal correction in vegetable prices, the assumption of a normal monsoon and a substantial reduction in global crude oil prices, we expect inflation to remain within the RBI target range in the coming quarters, he said.

In its previous policy in February, RBI had trimmed the repo rate by 25 basis points to 6.25%. This rate came after a previous rate reduction in May 2020.

(With inputs from PTI)