India cuts rates more than expected to boost economy

🇮🇳 RBI Slashes Rates to Boost Economic Growth

On June 6, 2025, the RBI reduced its benchmark repo rate by 50 basis points, bringing it down to 5.5%. This marks the third consecutive rate cut this year, totaling a 1% reduction. Additionally, the central bank lowered the cash reserve ratio (CRR) by 100 basis points to 3%, aiming to enhance liquidity in the banking system and encourage lending.

Governor Sanjay Malhotra stated that these measures are part of a strategy to “frontload” growth amid global uncertainties and stable domestic inflation, which has been revised down to 3.7% for the fiscal year ending March 2026.

📈 Market Response

The stock market responded positively to the RBI’s announcement. The BSE Sensex surged over 700 points, and the Nifty50 climbed above 24,900, reflecting investor optimism. Sectors sensitive to interest rates, such as banking, automobiles, financials, and real estate, rallied up to 5%.

🔍 Policy Shift

In a notable policy shift, the RBI changed its stance from “accommodative” to “neutral,” signaling a more balanced approach moving forward. This change suggests that while the central bank is committed to supporting growth, it remains cautious about future global risks and inflationary pressures.

These decisive actions by the RBI underscore its commitment to bolstering economic growth while maintaining monetary stability.