India cuts interest rates, citing 'challenging global conditions’
NEW DELHI
India's central bank cut interest rates in the world's fifth-largest economy on Wednesday as Donald Trump's tariffs kicked in and policymakers warned of "challenging global economic conditions".
The cut, the second this year, aims to boost a slowing economy grappling with the impact of Trump's sweeping tariffs.
The Reserve Bank of India (RBI) said the benchmark repo rate would be reduced by 25 basis points to 6 percent.
Easing inflation concerns over the last few months have allowed the RBI to focus on perking up the Indian economy, whose growth has slowed in the last few quarters.
While New Delhi is not a manufacturing powerhouse, experts believe that high U.S. tariffs will hurt billions of dollars of Indian exports across different sectors, including gems, jewellery and seafood.
Economists project that Trump's tariffs drive will impact India's GDP growth, with analysts at Goldman Sachs reducing their forecast for the current fiscal year from 6.3 to 6.1 percent.
The RBI's monetary policy committee (MPC) said in a statement that "recent trade tariff related measures" had "exacerbated uncertainties" and clouded the "economic outlook across regions".
"In such challenging global economic conditions, the benign inflation and moderate growth outlook demands that the MPC continues to support growth," the statement added.
India's central bank cut interest rates for the first time in nearly five years in February 2024, as it sought to boost an economy that has been weighed down by muted urban consumer sentiment, a sluggish manufacturing sector and lower government expenditure.
The Indian economy is projected to have grown at 6.5 percent in the last fiscal year, its slowest pace since the Covid-19 pandemic and down from 9.2 percent in 2023-24.
