The Reserve Bank of India (RBI) on Wednesday held the key repo rate steady at 5.50%, amid escalating trade tensions with the US under President Donald Trump.
The decision followed a unanimous vote by the central bank’s six-member Monetary Policy Committee (MPC), which opted to pause after delivering a surprise 50-basis-point cut in June. This is the third such reduction since February.
RBI Governor Sanjay Malhotra On Trump Tariff Threats
RBI Governor Sanjay Malhotra directly addressed concerns about Trump’s increasingly aggressive trade stance, particularly over India’s continued purchases of Russian crude oil.
“We don’t see a major impact of US tariffs on the Indian economy unless there is a retaliatory tariff,” Malhotra said during a press briefing. He added, “We are hopeful that we will have an amicable solution.”
The governor acknowledged the uncertain global trade landscape but remained optimistic about India’s economic position. “Global trade challenges remain, but the Indian economy holds bright prospects in the changing world order. We have taken decisive and forward-looking measures to support growth,” he stated.
Indian Economy Outlook: Domestic Demand, Above-Average Monsoon Buoy Growth Prospects
India’s strong domestic consumption, a forecast of above-average monsoon rains, and ongoing recovery in agriculture and rural markets are expected to drive GDP growth in the upcoming quarters, the central bank noted.
However, the Trump administration’s trade rhetoric continues to raise concerns. On Tuesday, the US President announced plans to “substantially” hike duties on Indian exports. This move follows an earlier decision to raise tariffs from 10% to 25%, scheduled to take effect on Thursday. Trump also reiterated warnings of separate penalties in response to India’s defense and energy ties with Russia.
Markets React To RBI Governor Sanjay Malhotra’s Repo Rate Announcement
Trump intensified his criticism last week by describing India as a “dead economy,” remarks that have been met with strong backlash from Indian political and trade quarters.
The RBI’s decision to hold rates steady triggered a negative reaction in the markets. Auto, real estate, and banking stocks, all sensitive to interest rate movements, fell by 5% on Wednesday, as investors weighed the growing risks from Washington’s protectionist policies.
Zubair Amin is a Senior Journalist at NewsX with over seven years of experience in reporting and editorial work. He has written for leading national and international publications, including Foreign Policy Magazine, Al Jazeera, The Economic Times, The Indian Express, The Wire, Article 14, Mongabay, News9, among others. His primary focus is on international affairs, with a strong interest in US politics and policy. He also writes on West Asia, Indian polity, and constitutional issues. Zubair tweets at zubaiyr.amin
