India central bank holds policy rate, as expected
The Reserve Bank of India (RBI) kept its key repo rate unchanged on Friday, as expected, amid strong economic growth and reduced tariff pressures following a trade deal with the United States.
A breakthrough agreement between Washington and New Delhi, announced earlier this week, includes a reduction in U.S. tariffs on Indian imports from nearly 50% to 18%, easing a key pressure point for India's economy and markets.
The RBI's six-member monetary policy committee voted unanimously to keep the repo rate at 5.25%, in line with the consensus view in a Reuters poll. The monetary policy stance was retained at "neutral", suggesting rates will stay low for some time to come. External headwinds have intensified but the successful completion of the trade deal with the U.S. augurs well for the economy, Reserve Bank of India Governor Sanjay Malhotra said in his policy statement. Inflation remains beningn, he said.
The central bank has now cut rates by a total of 125 basis points since February 2025, the most aggressive easing since 2019. It had cut rates by 25 basis points at its last meeting in December.
India remains one of the world's fastest?growing major economies, bolstered by strong domestic demand, public infrastructure spending and a relatively resilient services sector.
The economy is expected to grow 7.4% in the current financial year and the government's economic adviser has forecast growth at 6.8%-7.2% next year.
While trade tensions with the U.S. have been a drag on the world's fifth-largest economy, the U.S. has agreed to cut tariffs on Indian imports in exchange for India halting Russian oil purchases and lowering trade barriers.
Inflation in India has been low and expected to average close to 2% in the current financial year, below the central bank's target of 4%. In December, retail inflation stood at 1.33%, the highest in three months.
