MUMBAI: In a significant move on Wednesday, April 9, India's central bank made the decision to lower interest rates in the world's fifth-largest economy. This action comes in the wake of escalating trade tensions brought on by US President Donald Trump's tariffs, which have begun to take effect. Policymakers at the Reserve Bank of India (RBI) have expressed concerns over 'challenging global economic conditions' that are adversely impacting local growth.

This rate cut, marking the second reduction of the year, is aimed at revitalizing an economy that has been experiencing a slowdown. With the RBI announcing a reduction of the benchmark repo rate by 25 basis points, the new lending rate to commercial banks now stands at 6 percent. This decision reflects a strategic shift by the RBI to stimulate economic activity amid rising global trade uncertainties.

Coinciding with the RBI's announcement, the Trump administration implemented a reciprocal tariff of 26 percent affecting goods imported from India, which adds another layer of complexity to India's economic landscape. This tariff is part of a broader protectionist agenda that has sparked concerns among Indian exporters and policymakers alike.

In recent months, declining inflation rates have provided the RBI with some leeway to focus on bolstering the Indian economy. As growth has waned over the past few quarters, the central bank is under increasing pressure to take measures that will enhance economic output and maintain stability.

Despite not being recognized as a manufacturing powerhouse, India is poised to feel the adverse effects of high US tariffs. Industry experts warn that the sweeping tariffs could negatively impact billions of dollars in Indian exports across multiple sectors, including gems, jewellery, and seafood. The repercussions of these trade barriers could stymie growth and lead to potential job losses.

The situation requires vigilant attention from both policymakers and business leaders, as they navigate the complex interplay of domestic economic policies and international trade dynamics. As India grapples with these global challenges, the impact of Trump's tariffs will likely continue to resonate throughout the economy.