India cuts rates to 5.25% as expected as central bank flags ‘weakness in some key economic indicators’

India’s central bank cut its policy rate by 25 basis points to 5.25%, matching forecasts from economists polled by Reuters.

The monetary policy committee delivered a unanimous reduction, citing “weakness in some key economic indicators,” even as headline inflation has eased significantly and is expected to be revised lower in the first quarter of 2025, said RBI governor Sanjay Malhotra.

The economy expanded 8.2% from July to September, outpacing expectations, while inflation remains subdued.

RBI’s Malhotra, explaining the rationale for keeping rates unchanged at the last policy meeting in October, warned that although inflation moderated significantly in the first quarter, growth could still slow in the second half of the financial year due to global trade uncertainties.

Still, industrial activity in October fell to a 14-month low, and indicators such as HSBC’s manufacturing PMI fell to a nine-month low in November, suggesting an economic slowdown.