The Reserve Bank of India (RBI) has released the minutes of the Monetary Policy Committee (MPC) meeting, which took place from April 7-9, 2025. The meeting resulted in a 25 basis point cut in the repo rate to 6% and a shift in the policy stance from ‘neutral’ to ‘accommodative’. This decision was made amidst global trade uncertainties and a slowdown in commodity prices. RBI Governor Sanjay Malhotra stated that India’s inflation is expected to align with the target during FY26, citing disinflationary forces outweighing inflationary risks.
The current Consumer Price Index (CPI) inflation rate is 3.3%, which is the lowest since August 2019. The MPC voted unanimously to ease policy rates for the second consecutive time, aiming to nurture domestic demand amid a global slowdown. The drop in crude oil prices and moderated commodity inflation have led to lower CPI readings. The RBI’s positive inflation forecast is based on the expectation that disinflationary forces will continue to outweigh inflationary risks, allowing for monetary easing to support economic growth.
The MPC members expressed varying opinions on the implications of global trade and tariffs. Some members, such as Sanjay Malhotra and Saugata Bhattacharya, emphasized the favorable inflation outlook and the need for policy easing to support domestic demand. Others, such as M Rajeshwar Rao and Rajiv Ranjan, cautioned about the potential impact of US tariffs on India’s exports and market stability.
The key factors contributing to the easing inflation include falling crude prices and weak global demand. However, the major concern remains the impact of US tariffs on exports and growth. The RBI will continue to monitor global developments and their impact on India’s economy. Overall, the RBI’s decision to cut the repo rate and shift the policy stance to ‘accommodative’ is expected to support economic growth and keep inflation within the target range of 4% ± 2%.
The RBI’s inflation forecast is based on the assumption that global trade tensions will not escalate further and that commodity prices will remain stable. The bank will continue to monitor the situation and adjust its policies accordingly. The decision to cut the repo rate is expected to have a positive impact on the economy, as it will make borrowing cheaper and increase liquidity in the system. However, the RBI will need to be cautious and ensure that the inflation rate does not exceed the target range.