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December 06, 2025 Indian Economy Boosted by RBI Rate Cut Amidst Strengthening Russia Ties

The Reserve Bank of India (RBI) has reduced its key repo rate by 25 basis points to 5.25%, citing robust economic growth and significantly low inflation, a move expected to further stimulate the Indian economy. This development coincides with India and Russia's agreement on an ambitious economic cooperation program, targeting a $100 billion bilateral trade by 2030.

RBI Cuts Repo Rate Amidst Strong Economic Performance

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) unanimously decided on Friday, December 5, 2025, to reduce the policy repo rate by 25 basis points, bringing it down to 5.25% with immediate effect. This marks the first rate cut in six months and the fourth such reduction since February 2025, totaling 125 basis points in easing measures.

RBI Governor Sanjay Malhotra highlighted that the decision was driven by India's robust economic growth and a significant reduction in inflation. India's real Gross Domestic Product (GDP) growth accelerated to 8.2% in the second quarter of the fiscal year, with the overall GDP growth projection for 2025-26 revised upwards to 7.3% from an earlier 6.8%. Inflation, conversely, has seen rapid disinflation, with the average headline inflation for Q2:2025-26 falling to an unprecedented 1.7%, breaching the lower tolerance threshold of 2%. The CPI inflation forecast for 2025-26 has been lowered to 2% from the previous estimate of 2.6%.

Despite external challenges, including punitive tariffs imposed by the US and a depreciation of the Indian rupee which briefly breached 90 to a dollar, the RBI Governor stated that these factors have had a "minimal impact on the economy." The central bank's neutral stance suggests further room for rate adjustments if inflation remains benign.

India and Russia Strengthen Economic Ties

In a significant development for India's international relations and trade, Prime Minister Narendra Modi and Russian President Vladimir Putin held a summit where they agreed on an Economic Cooperation Programme until 2030. This comprehensive pact aims to diversify trade and investment linkages, with both leaders expressing confidence in achieving a bilateral trade target of USD 100 billion well before the 2030 deadline.

Key areas of cooperation include energy, critical minerals, shipbuilding, manufacturing, and technology partnerships. Discussions have also commenced on a Free Trade Agreement between India and the Eurasian Economic Union. The leaders emphasized the importance of mutual trust as the foundation of their partnership and highlighted joint efforts in innovation, co-production, and co-creation.

Stock Market Reacts Positively

Indian equity benchmarks, including the Sensex and Nifty, closed higher following the RBI's rate cut announcement. The Nifty closed above the 26,000 mark, with investors cheering the central bank's move to support economic growth.

Other Key Developments

  • The Government of India has renamed the Prime Minister's Office (PMO) complex as 'Seva Teerth' to reflect a focus on service-oriented, citizen-centric governance.

  • The NITI Aayog's Frontier Tech Hub, in collaboration with IBM, unveiled a roadmap titled "Transforming India into a Leading Quantum-Powered Economy," aiming to make India one of the top-3 quantum economies globally by 2047.

  • The Sahkar Taxi Cooperative Limited initiated a soft launch of its 'Bharat Taxi' ride-hailing service in New Delhi and Gujarat.

  • The Government of India approved Sustainable Aviation Fuel (SAF) blending targets for international flights: 1% by 2027, 2% by 2028, and 5% by 2030.

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