Amid US tariffs, Nirmala Sitharaman says India needs support from RBI, govt; welcomes second straight 25 bps rate cut

Finance Minister Nirmala Sitharaman said on April 9, the Indian economy - hit by US trade tariffs - will need help from the Reserve Bank of India (RBI) and the government as she welcomed Wednesday's interest rate cut by the central bank.

The RBI's Monetary Policy Committee (MPC) cut its repo rate for a second consecutive time by 25 basis points as it seeks to boost a sluggish economy in the face of US President Donald Trump's change in trade policy. RBI started lowering rates with a quarter-point reduction in February, its first cut since May 2020.

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"I welcome it with a sense of joy," FM Sitharaman told reporters when asked about the interest rate cut during a trip to London for the 13th UK-India economic and financial dialogue, adding that “growth is of great importance. We are at a situation where, because of the global uncertainties, we will need every support both from the central bank and from the (finance) ministry."

US tariff hike on India

The imposition of a 26 per cent tariff on Indian exports, coupled with higher duties on some other countries such as China, has raised alarm among Indian exporters in sectors such as gems and jewellery, chemicals, pharmaceuticals and engineering goods. Sitharaman said sustained growth with a focus on domestic demand was possible.

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Sitharaman, speaking alongside British finance minister Rachel Reeves after a bilateral meeting, she said that she was positive about the possibility of a free trade deal between UK and India. "I think both sides realise that we’ve had a lot of discussions, which was well worth it, but now it's the time to conclude (the trade deal)," she said.

RBI monetary policy 

Following the 25 basis point (bps) cut by the RBI MPC, the key policy rate eased to six per cent. This led to borrowing costs hitting the lowest level since November 2022. The central bank changed its stance from "accommodative" to "neutral."

RBI Governor Sanjay Malhotra on Wednesday highlighted that any decrease in the interest rate takes at least six to nine months to be transmitted after the latest announcements, and the central bank will be watchful of it. 

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"Transmission, you are aware, it takes a little while. It will not happen immediately. We have seen that transmission in the past; when we increased the repo rate by 250 bps, it took at least six to nine months for the interest rates to decrease in response to the policy repo rate decrease," he said.