The move comes as the global economic outlook darkens following a wave of reciprocal tariffs imposed by the United States, fueling fears of higher inflation, trade tensions, and slower global growth.
09 Apr 2025 | 1449 Views | By Darshan Nakhwa
The Reserve Bank of India’s Monetary Policy Committee has cut the repo rate by 25 basis points to 6%, marking its second consecutive rate reduction. The central bank also changed its monetary policy stance to accommodative from neutral, aimed at supporting economic growth amid rising global uncertainties and is expected ...
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The Reserve Bank of India’s Monetary Policy Committee has cut the repo rate by 25 basis points to 6%, marking its second consecutive rate reduction. The central bank also changed its monetary policy stance to accommodative from neutral, aimed at supporting economic growth amid rising global uncertainties and is expected to provide a timely boost to sectors like automobiles, where demand remains fragile.
The move comes as the global economic outlook darkens following a wave of reciprocal tariffs imposed by the United States, fueling fears of higher inflation, trade tensions, and slower global growth.
“Global economic outlook is fast changing. FY26 has started on an anxious note and some global trade frictions are coming true,” said RBI Governor Sanjay Malhotra.
The repo rate is the rate at which the RBI lends to commercial banks. A reduction makes borrowing cheaper for banks, and, in theory, this trickles down to consumers in the form of lower loan interest rates. If banks pass on the benefit, customers may see cheaper auto loans, home loans, and personal loans—which could stimulate spending and investment.
The RBI’s move is likely to have an immediate impact on the auto industry, which has been grappling with fluctuating consumer demand. According to the Society of Indian Automobile Manufacturers (SIAM), the reduction in rates at this time would have a positive impact on the auto sector.
Lower car loan interest rates may nudge more customers to purchase vehicles, especially as financial institutions revise lending rates. Given that a significant portion of passenger vehicle purchases are financed through credit, even a small dip in loan rates can tip buyer sentiment positively.
In March, India’s overall automobile retail sales dipped by 0.7% year-on-year, according to data from the Federation of Automobile Dealers Associations (FADA). While passenger vehicles and commercial vehicles registered growth of 6% and 2.6% respectively, two-wheelers, three-wheelers, and tractors all saw declines of 1.7%, 5.6%, and 5.7%.
Looking ahead to April, auto dealers remain cautious. In a recent statement, FADA highlighted the compounding effects of weather disruptions and geopolitical instability. “As April dawns, auto dealers across India brace for an uncertain month shaped by both domestic and global factors. IMD’s warning of intense heatwaves looms over consumer footfall and infrastructure activity, while renewed tariff tensions on the international stage add market volatility and rattle buyer sentiment,” FADA said in a statement.
“Despite these headwinds, nearly half of surveyed dealers still expect April sales to be flat and over a third foresee some growth—driven partly by regional festivals and the marriage season. Yet, the picture is far from rosy: nearly 60% of dealers across all segments report weak booking pipelines, signalling a fragile foundation on which any optimism must rest,” according to FADA.