SHARE THIS NEWS
Close
Font Size
  • AbcSmall
  • AbcNormal
  • AbcLarge
Close
Policy

Amid RBI rate cut cheers, did you miss RBI's alert that could threaten India’s economy?

Amid RBI rate cut cheers, did you miss RBI's alert that could threaten India’s economy?TIL Creatives

RBI said India is not immune to the global storms (AI Image)

Synopsis
RBI MPC Policy: The Reserve Bank of India (RBI) has cut interest rates for the first time in nearly five years, reducing the repo rate to 6.25% to support economic growth. However, Governor Sanjay Malhotra warned of global risks that could impact India's financial stability. Increasing global volatility, potential trade wars, and an unstable geopolitical landscape pose significant challenges ahead.
ET Online
SHARE THIS NEWS
Close
Font Size
  • AbcSmall
  • AbcNormal
  • AbcLarge
Close
For the first time in nearly five years, the Reserve Bank of India (RBI) has cut interest rates. In a move aimed at supporting economic growth, the six-member Monetary Policy Committee (MPC), led by newly appointed Governor Sanjay Malhotra, lowered the repo rate by 25 basis points to 6.25%. But alongside the cautious optimism, Governor Sanjay Malhotra delivered a stark warning: India is not immune to the global storms brewing on the horizon.
Tired of too many ads? Remove Ads

Also Read: Governor Sanjay Malhotra administers a growth pill with 25 bps rate cut

The decision comes against a backdrop of moderating inflation and slower-than-expected economic growth. While inflation has eased, helped by stable food prices and the impact of past monetary policy actions, growth remains fragile. The RBI expects economic activity to pick up in the coming quarters, but GDP expansion is still significantly lower than last year’s pace.

A strong rabi harvest and a revival in industrial activity are expected to provide much-needed support to growth. On the demand side, household consumption is likely to stay resilient, helped by tax relief measures in the Union Budget.

Business confidence is holding up, with higher capacity utilisation, stronger corporate balance sheets, and steady credit flows pointing towards a rebound in fixed investment. The government’s continued focus on capital expenditure is another key pillar of support, reflected in positive signals from enterprise surveys and purchasing managers’ indices (PMIs).

Tired of too many ads? Remove Ads
India’s booming services exports are expected to remain a crucial growth driver. However, the global backdrop remains uncertain. Geopolitical tensions, rising trade protectionism, fluctuating commodity prices, and financial market volatility pose real risks to the outlook. While the domestic economy is showing resilience, external shocks could still disrupt the recovery path.

Also Read: Malhotra & Co peg India’s FY26 growth aim at 6.7%

This delicate balance between taming inflation and boosting growth has given the MPC room to act. But the governor’s message was clear—while rate cuts can help, India is not insulated from the rising global risks that could disrupt its financial stability. As world markets grow increasingly volatile, the Indian economy must brace for potential shocks.

"A higher worry for us is the global uncertainties and how that pans out," Malhotra said in post-policy press conference.

Slowing world economy and rising financial risks

The global economy is struggling to maintain momentum. Growth remains below historical averages, and while trade is still expanding, progress on bringing down inflation has stalled.

For emerging markets like India, the situation is even more complex.

As expectations of aggressive rate cuts in the US fade, the US dollar has gained strength, pushing bond yields higher, Malhotra noted. This shift has triggered large capital outflows from Emerging Market Economies (EMEs), causing their currencies to depreciate sharply and financial conditions to tighten. At the same time, monetary policies in advanced economies are moving in different directions, adding to market turbulence. Geopolitical tensions, trade disputes, and policy uncertainties have further intensified volatility, leaving EMEs facing tough choices as they navigate an increasingly unpredictable global landscape.

The Indian rupee has already felt the heat. Over the past few months, the currency has faced depreciation pressures as global investors pulled money from riskier markets. The RBI has been actively managing this volatility, but with external pressures mounting, the battle to stabilise the rupee is far from over.

Tired of too many ads? Remove Ads
"The RBI will remain watchful of the global uncertainties and their impact on the Indian economy. A global trade war could adversely affect India’s growth, inflation, and trade dynamics. However, there is still a lack of clarity on the extent of this impact," Rajani Sinha, Chief Economist at CareEdge, said.

The Trump trade turmoil

Adding another layer of uncertainty is the return of Donald Trump to the White House. The US President has wasted no time in reviving his aggressive trade policies, threatening allies and rivals alike with tariffs.

One of his latest warnings is aimed squarely at BRICS nations, including India. Trump has threatened to impose 100% tariffs if BRICS countries attempt to weaken the dominance of the US dollar by promoting an alternative global currency.

"Even if the tariff trade wars were not to carry out, but just the uncertainty in itself is something, you know, which is worrisome and that has direct impact on growth, that has direct impact on investment decisions and that has direct impact on consumption expenditure decisions, which gets deferred," Malhotra said.

Malhotra said while rupee depreciation is also linked to the uncertainties, it's not good for growth and it's not good for imported inflation.

India has so far avoided direct tariff hikes in the latest wave of US protectionist measures. With nearly 18% of India’s total exports heading to the US, any disruption in trade ties could hit Indian businesses hard.

"With the Trump Administration in the US shaking up global markets, expect the RBI to be proactive in using liquidity and forex management tools...The tariff war set off will have a bearing on policy rate cuts worldwide," Dharmakirti Joshi, Chief Economist, Crisil, said.

In 2023-24 alone, India exported goods worth $77.5 billion to the US, more than the next three largest export markets combined. A sudden shift in US trade policy could have ripple effects across industries, from IT and pharmaceuticals to textiles and engineering goods.

At the same time, there are opportunities for India. The growing strategic partnership with the US in sectors like defence, energy, and technology could open new doors. But the uncertainty of a Trump-driven trade war remains a looming threat.

Geopolitical tensions and market volatility

Beyond trade wars, the global geopolitical landscape remains unstable. Conflicts in Eastern Europe, the Middle East, and tensions in the South China Sea are keeping financial markets on edge.

Meanwhile, major central banks are pursuing diverging monetary policies. While the European Central Bank is considering rate cuts, the US Federal Reserve has signalled caution, leading to wild swings in global financial markets. This unpredictability makes it harder for emerging economies like India to plan ahead, as they remain vulnerable to sudden shifts in investor sentiment.

For India, this means staying vigilant. The RBI has reaffirmed its commitment to financial stability, but with so many external forces at play, managing risks will require constant intervention.

A strong dollar and rising US bond yields make things more difficult for India. They increase the cost of imports, put pressure on inflation, and make it more expensive for Indian businesses to borrow from international markets.

The RBI has assured that it is using all available tools to manage these challenges, but the road ahead is uncertain. A stronger US dollar, volatile oil prices, and the possibility of tighter global financial conditions could further complicate India’s economic outlook.

RBI striking the right balance

Governor Malhotra said every policy decision comes with trade-offs. While financial stability and consumer protection remain priorities, the push for efficiency must continue.

The RBI will have to walk a tightrope - cutting rates to support growth while ensuring financial stability in a turbulent global environment.

For now, India remains one of the most resilient economies in the world. But as global risks mount, policymakers and businesses alike must prepare for uncertainty.

The next few months will be crucial in determining whether India can weather the storm or get caught in the crosswinds of global turmoil.
Continue Reading

(Catch all the Business News, Breaking News, Budget 2025 Events and Latest News Updates on The Economic Times.)

Subscribe to The Economic Times Prime and read the ET ePaper online.

More

print edition
print edition title
Tuesday, 18 March, 2025
  • Digital View
  • Print View
  • Wealth Edition

Prime Account Detected!

It seems like you're already an ETPrime member with

Login using your ET Prime credentials to enjoy all member benefits

Sign in & Access ET Prime
universo-virtual.com
buytrendz.net
thisforall.net
benchpressgains.com
qthzb.com
mindhunter9.com
dwjqp1.com
secure-signup.net
ahaayy.com
soxtry.com
tressesindia.com
puresybian.com
krpano-chs.com
cre8workshop.com
hdkino.org
peixun021.com
qz786.com
utahperformingartscenter.org
maw-pr.com
zaaksen.com
ypxsptbfd7.com
worldqrmconference.com
shangyuwh.com
eejssdfsdfdfjsd.com
playminecraftfreeonline.com
trekvietnamtour.com
your-business-articles.com
essaywritingservice10.com
hindusamaaj.com
joggingvideo.com
wandercoups.com
onlinenewsofindia.com
worldgraphic-team.com
bnsrz.com
wormblaster.net
tongchengchuyange0004.com
internetknowing.com
breachurch.com
peachesnginburlesque.com
dataarchitectoo.com
clientfunnelformula.com
30pps.com
cherylroll.com
ks2252.com
webmanicura.com
osostore.com
softsmob.com
sofietsshotel.com
facetorch.com
nylawyerreview.com
apapromotions.com
shareparelli.com
goeaglepointe.com
thegreenmanpubphuket.com
karotorossian.com
publicsensor.com
taiwandefence.com
epcsur.com
odskc.com
inzziln.info
leaiiln.info
cq-oa.com
dqtianshun.com
southstills.com
tvtv98.com
thewellington-hotel.com
bccaipiao.com
colectoresindustrialesgs.com
shenanddcg.com
capriartfilmfestival.com
replicabreitlingsale.com
thaiamarinnewtoncorner.com
gkmcww.com
mbnkbj.com
andrewbrennandesign.com
cod54.com
luobinzhang.com
bartoysdirect.com
taquerialoscompadresdc.com
aaoodln.info
amcckln.info
drvrnln.info
dwabmln.info
fcsjoln.info
hlonxln.info
kcmeiln.info
kplrrln.info
fatcatoons.com
91guoys.com
signupforfreehosting.com
faithfirst.net
zjyc28.com
tongchengjinyeyouyue0004.com
nhuan6.com
oldgardensflowers.com
lightupthefloor.com
bahamamamas-stjohns.com
ly2818.com
905onthebay.com
fonemenu.com
notanothermovie.com
ukrainehighclassescort.com
meincmagazine.com
av-5858.com
yallerdawg.com
donkeythemovie.com
corporatehospitalitygroup.com
boboyy88.com
miteinander-lernen.com
dannayconsulting.com
officialtomsshoesoutletstore.com
forsale-amoxil-amoxicillin.net
generictadalafil-canada.net
guitarlessonseastlondon.com
lesliesrestaurants.com
mattyno9.com
nri-homeloans.com
rtgvisas-qatar.com
salbutamolventolinonline.net
sportsinjuries.info
topsedu.xyz
xmxm7.com
x332.xyz
sportstrainingblog.com
autopartspares.com
readguy.net
soniasegreto.com
bobbygdavis.com
wedsna.com
rgkntk.com
bkkmarketplace.com
zxqcwx.com
breakupprogram.com
boxcardc.com
unblockyoutubeindonesia.com
fabulousbookmark.com
beat-the.com
guatemala-sailfishing-vacations-charters.com
magie-marketing.com
kingstonliteracy.com
guitaraffinity.com
eurelookinggoodapparel.com
howtolosecheekfat.net
marioncma.org
oliviadavismusic.com
shantelcampbellrealestate.com
shopleborn13.com
topindiafree.com
v-visitors.net
qazwsxedcokmijn.com
parabis.net
terriesandelin.com
luxuryhomme.com
studyexpanse.com
ronoom.com
djjky.com
053hh.com
originbluei.com
baucishotel.com
33kkn.com
intrinsiqresearch.com
mariaescort-kiev.com
mymaguk.com
sponsored4u.com
crimsonclass.com
bataillenavale.com
searchtile.com
ze-stribrnych-struh.com
zenithalhype.com
modalpkv.com
bouisset-lafforgue.com
useupload.com
37r.net
autoankauf-muenster.com
bantinbongda.net
bilgius.com
brabustermagazine.com
indigrow.org
miicrosofts.net
mysmiletravel.com
selinasims.com
spellcubesapp.com
usa-faction.com
snn01.com
hope-kelley.com
bancodeprofissionais.com
zjccp99.com
liturgycreator.com
weedsmj.com
majorelenco.com
colcollect.com
androidnews-jp.com
hypoallergenicdogsnames.com
dailyupdatez.com
foodphotographyreviews.com
cricutcom-setup.com
chprowebdesign.com
katyrealty-kanepa.com
tasramar.com
bilgipinari.org
four-am.com
indiarepublicday.com
inquick-enbooks.com
iracmpi.com
kakaschoenen.com
lsm99flash.com
nana1255.com
ngen-niagara.com
technwzs.com
virtualonlinecasino1345.com
wallpapertop.net
nova-click.com
abeautifulcrazylife.com
diggmobile.com
denochemexicana.com
eventhalfkg.com
medcon-taiwan.com
life-himawari.com
myriamshomes.com
nightmarevue.com
allstarsru.com
bestofthebuckeyestate.com
bestofthefirststate.com
bestwireless7.com
declarationintermittent.com
findhereall.com
jingyou888.com
lsm99deal.com
lsm99galaxy.com
moozatech.com
nuagh.com
patliyo.com
philomenamagikz.net
rckouba.net
saturnunipessoallda.com
tallahasseefrolics.com
thematurehardcore.net
totalenvironment-inthatquietearth.com
velislavakaymakanova.com
vermontenergetic.com
sizam-design.com
kakakpintar.com
begorgeouslady.com
1800birks4u.com
2wheelstogo.com
6strip4you.com
bigdata-world.net
emailandco.net
gacapal.com
jharpost.com
krishnaastro.com
lsm99credit.com
mascalzonicampani.com
sitemapxml.org
thecityslums.net
topagh.com
flairnetwebdesign.com
bangkaeair.com
beneventocoupon.com
noternet.org
oqtive.com
smilebrightrx.com
decollage-etiquette.com
1millionbestdownloads.com
7658.info
bidbass.com
devlopworldtech.com
digitalmarketingrajkot.com
fluginfo.net
naqlafshk.com
passion-decouverte.com
playsirius.com
spacceleratorintl.com
stikyballs.com
top10way.com
yokidsyogurt.com
zszyhl.com
16firthcrescent.com
abogadolaboralistamd.com
apk2wap.com
aromacremeria.com
banparacard.com
bosmanraws.com
businessproviderblog.com
caltonosa.com
calvaryrevivalchurch.org
chastenedsoulwithabrokenheart.com
cheminotsgardcevennes.com
cooksspot.com
cqxzpt.com
deesywig.com
deltacartoonmaps.com
despixelsetdeshommes.com
duocoracaobrasileiro.com
fareshopbd.com
goodpainspills.com
kobisitecdn.com
makaigoods.com
mgs1454.com
piccadillyresidences.com
radiolaondafresca.com
rubendorf.com
searchengineimprov.com
sellmyhrvahome.com
shugahouseessentials.com
sonihullquad.com
subtractkilos.com
valeriekelmansky.com
vipasdigitalmarketing.com
voolivrerj.com
zeelonggroup.com
1015southrockhill.com
10x10b.com
111-online-casinos.com
191cb.com
3665arpentunitd.com
aitesonics.com
bag-shokunin.com
brightotech.com
communication-digitale-services.com
covoakland.org
dariaprimapack.com
freefortniteaccountss.com
gatebizglobal.com
global1entertainmentnews.com
greatytene.com
hiroshiwakita.com
iktodaypk.com
jahatsakong.com
meadowbrookgolfgroup.com
newsbharati.net
platinumstudiosdesign.com
slotxogamesplay.com
strikestaruk.com
trucosdefortnite.com
ufabetrune.com
weddedtowhitmore.com
12940brycecanyonunitb.com
1311dietrichoaks.com
2monarchtraceunit303.com
601legendhill.com
850elaine.com
adieusolasomade.com
andora-ke.com
bestslotxogames.com
cannagomcallen.com
endlesslyhot.com
iestpjva.com
ouqprint.com
pwmaplefest.com
qtylmr.com
rb88betting.com
buscadogues.com
1007macfm.com
born-wild.com
growthinvests.com
promocode-casino.com
proyectogalgoargentina.com
wbthompson-art.com
whitemountainwheels.com
7thavehvl.com
developmethis.com
funkydogbowties.com
travelodgegrandjunction.com
gao-town.com
globalmarketsuite.com
blogshippo.com
hdbka.com
proboards67.com
outletonline-michaelkors.com
kalkis-research.com
thuthuatit.net
buckcash.com
hollistercanada.com
docterror.com
asadart.com
vmayke.org
erwincomputers.com
dirimart.org
okkii.com
loteriasdecehegin.com
mountanalog.com
healingtaobritain.com
ttxmonitor.com
bamthemes.com
nwordpress.com
11bolabonanza.com
avgo.top