RBI Cuts Repo Rate to 5.25% as Rupee Slides

The Reserve Bank of India has lowered the repo rate by 25 basis points to 5.25%, as policymakers try to navigate record-low inflation alongside a sharp decline in the rupee and strong GDP growth above 8%.

The latest policy move follows two consecutive meetings where the central bank kept the rate unchanged. RBI Governor Sanjay Malhotra had recently indicated that there was room for easing, reflecting confidence in the inflation outlook. However, the situation has become more complex in recent weeks, with India’s economy showing resilience even under steep US tariffs while the rupee has fallen to historic lows below 90 per dollar.

Economists note that the combination of rapid economic expansion and currency weakness made the policy decision especially challenging. Some analysts believe the central bank may now move toward a longer pause, as the sharp slide in the rupee has increased uncertainty, particularly with India still awaiting clarity on a potential trade agreement with the US.

The rupee’s decline since the previous MPC meeting added pressure on the RBI, which has shifted from actively defending the currency to allowing it to breach the 90-per-dollar mark. The rate cut signals an attempt to support growth while managing volatility in the foreign exchange market.