RBI Cuts Repo Rate to 5.25% Amid Rupee Slump and Strong GDP Forecast
The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points to 5.25%, marking its first rate cut after two consecutive pauses.
The decision comes as inflation remains well below the RBI’s 4% target, even as the rupee has weakened sharply against the US dollar.
Governor Sanjay Malhotra had signalled scope for easing last month, and the latest move reflects the central bank’s effort to balance resilient domestic growth with external currency pressures. India’s GDP forecast has been revised upward to 7.3% for FY26, while inflation expectations have been lowered to 2%.
Despite steep US tariffs and global headwinds, India’s economy continues to outperform major peers, supported by strong domestic demand.
However, economists caution that rupee volatility could force the RBI into a phase of cautious policy management. Institutions like Citigroup, Standard Chartered, and SBI had expected a pause, citing currency risks.
The RBI’s neutral stance suggests it will remain flexible, navigating between sustaining growth momentum and stabilising the rupee.
For businesses and consumers, the rate cut could ease borrowing costs, but the broader outlook hinges on how India manages external shocks in the months ahead.
