India’s central bank has once again stepped in with a measured response to the growing economic uncertainty by cutting the repo rate by 25 basis points, bringing it down to 6 per cent. While this move may appear modest on the surface, it signals a strategic shift in the Reserve Bank of India’s stance ~ from “neutral” to “accommodative” ~ indicating a willingness to use more tools to support growth amid global headwinds. This cut comes at a time when India’s economy, though still the fastest-growing among major economies, is losing steam.

The downward revision of GDP growth projections to 6.5 per cent is telling. Just a year ago, the economy was growing at over 9 per cent. The slide may not be dramatic in statistical terms, but the implications are significant, especially when compounded by the fallout from escalating global trade tensions. The renewed tariff offensive ~ though temporarily paused ~ by the United States, this time targeting Indian exports, has added an external shock that India could ill afford at a time when domestic demand remains fragile, private investment is tepid, and fiscal space is constrained. Unlike in the past, when global slowdowns were cushioned by strong domestic fundamentals, India today faces both external and internal pressures.

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Exports are under strain, and with foreign capital inflows slowing, the ripple effect on the rupee, markets, and corporate investment sentiment could be considerable. This is not just an economic moment ~ it is a test of policy agility, resilience, and foresight in steering India through one of the most volatile global trade environments in years. The RBI’s move, in this context, is prudent. Lower borrowing costs can spur consumption and investment, giving businesses and households alike a much-needed breather.

However, the effectiveness of monetary policy is not unlimited. A rate cut cannot, by itself, reverse the effects of trade disruption or revive business confidence in an uncertain global environment. What’s needed is a more coordinated approach. Monetary easing must be complemented by clear, targeted fiscal measures ~ especially those that boost infrastructure, manufacturing, and export competitiveness. The government must resist the temptation to adopt populist spending that does little for long-term productivity. Instead, it should focus on policies that reduce the cost of doing business, improve logistics, and provide regulatory certainty.

Meanwhile, India must also adopt a smarter trade strategy. While retaliation has been the global norm in the face of protectionist measures, India’s restrained approach and willingness to negotiate a bilateral trade deal with the US is pragmatic. But trade diplomacy should not mean passive acceptance. India must secure better terms and push for greater access to key markets. The RBI’s signal is clear: the central bank stands ready to support the economy. But unless supported by structural reforms and fiscal prudence, interest rate cuts alone won’t be enough. The onus is now on policymakers to ensure India’s growth story regains momentum and doesn’t become a casualty of a turbulent global order.