KOLKATA: India’s central bank, the Reserve Bank of India (RBI), has lowered interest rates by 0.25 per cent, from 6.25 per cent to 6 per cent, marking the second rate cut since February. This move comes amid concerns over growth following US President Donald Trump’s tariff announcements.
The RBI also revised its growth forecast for the year down from 6.7 per cent to 6.5 per cent, and expects the same 6.5 per cent growth for next year. The repo rate, which is the rate at which the RBI lends to commercial banks, directly affects borrowing costs.
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Meanwhile, the International Monetary Fund (IMF) has said that it sees the US-China trade grievances and welcomes India’s tariff cut. IMF Managing Director Kristalina Georgieva said on Thursday that the US and China both have trade grievances, but the world’s two largest economies needed to reduce uncertainty and agree on a fairer, rules-based trading system.
Georgieva, speaking at an event in Washington ahead of next week’s IMF and World Bank spring meetings, also welcomed India’s decision to reduce trade barriers and said that tariffs elsewhere could also drop amid negotiations over President Donald Trump’s tariffs.
Georgieva refrained from directly criticizing Trump’s tariff assault on its trading partners, noting that an increase in tariffs and non-tariff trade barriers were feeding negative perceptions of the multilateral system.
“This feeling of unfairness in some places fits the narrative, ‘we play by the rules while others game the system without penalty,’” Georgieva said. “Trade imbalances steer trade tensions.”
She said that the US had grievances around China’s intellectual property practices and non-tariff barriers, while China is seeking US engagement that would put both economies on a solid footing.
“We would like to see a reduction in uncertainty, and it is hard to get there if the two largest economies are still finding their footing and when, obviously, from the perspective of the world economy, it is important that the result of all this is a more, fairer, rule-based system,” Georgieva said.
The IMF chief said that India was uneasy with reducing tariffs and trade barriers, but “India is now doing it.” She added that this would be helpful for the country’s growth prospects.
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She said it was possible that tariffs and other trade barriers also could come down in the European Union as well and could encourage more bilateral and plurilateral trade agreements.
“Well, in injecting this moment, yes, it is bilateral discussions, but I expect this to lead to some action around reducing, eliminating barriers that could have broader benefit for the world,” Georgieva said.