In a bold and unexpected move, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points (bps) to 5.50% on June 6, offering relief to millions of borrowers across the country. This is the third rate cut in a row, bringing the total reduction to 100 bps.&nbsp;The decision, announced after the RBI’s three-day Monetary Policy Committee (MPC) meeting, exceeded market expectations of a modest 25 bps cut.&nbsp;Alongside the repo rate reduction, the RBI also plans to lower the cash reserve ratio (CRR) by 100 bps on four tranches over the year, from 4 per cent to 3 per cent, freeing up an estimated ₹2.5 lakh crore (nearly $29 billion) in liquidity. This double-pronged move is aimed at stimulating lending, boosting economic activity, and lowering borrowing costs for both individuals and businesses.<h2>What is the repo rate, and why does it matter?</h2>The repo rate is the rate at which the RBI lends money to commercial banks. A lower repo rate means banks can borrow funds more cheaply. This, in turn, usually leads banks to reduce interest rates on loans to customers—impacting everything from home loans to auto and personal loans.&nbsp;Retail floating-rate loans issued after October 2019 are linked to external benchmarks, usually the repo rate, which means that EMIs (equated monthly instalments) adjust according to changes in the repo rate.&nbsp;Domestic banks typically pass on these rate cuts to borrowers either fully or partially, depending on their interest reset cycle, which generally occurs within three to six months.<h2>How much will borrowers save?</h2>If banks fully pass on the 50 bps cut, the savings for borrowers could be substantial:&nbsp;Home loan of ₹50 lakh at 8.70 per cent for 30 years:Current EMI: ₹39,136Interest rate drops by 50 bps to 8.20 per cent:New EMI: ₹37,346Monthly Savings: ₹1,790Annual Savings: ₹21,480While the monthly savings might not seem like much, over a 30-year term, even small monthly savings add up to lakhs of rupees and bring real long-term financial relief.&nbsp;Now let's say you took a car loan or a personal loan of ₹5 lakh at 12 per cent for 5 years:Current EMI: ₹11,122Interest rate drops by 50 bps to 11.50 per cent:New EMI: ₹10,963Monthly Savings: ₹159Annual Savings: ₹1,908&nbsp;Borrowers can choose to enjoy the lower EMIs or retain their existing payments and shorten the loan tenure, reducing overall interest paid.<h2>Impact on FD Investors</h2>While the move is positive for borrowers, it could hurt bank fixed deposit (FD) investors. As the RBI’s lending rates drop, banks are expected to reduce FD rates across various tenures, leading to lower returns.&nbsp;Financial advisors suggest locking in current FD rates before they decline or considering alternatives like post office small savings schemes.&nbsp;The RBI’s aggressive rate cut comes amid cooling inflation and global uncertainty. It aims to support domestic consumption and revive credit growth. Borrowers are advised to watch how their banks react to the transmission of rate cuts.&nbsp;For those with existing loans or planning to borrow, the current environment presents a golden opportunity to ease financial pressure or invest in big-ticket purchases like homes or vehicles.

A lower repo rate usually leads banks to reduce interest rates on loans to customers—impacting everything from home loans to auto and personal loans.

In a bold and unexpected move, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points (bps) to 5.50% on June 6, offering relief to millions of borrowers across the country. This is the third rate cut in a row, bringing the total reduction to 100 bps. The decision, announced after the RBI’s three-day Monetary Policy Committee (MPC) meeting, exceeded market expectations of a modest 25 bps cut. Alongside the repo rate reduction, the RBI also plans to lower the cash reserve ratio (CRR) by 100 bps on four tranches over the year, from 4 per cent to 3 per cent, freeing up an estimated ₹2.5 lakh crore (nearly $29 billion) in liquidity. This double-pronged move is aimed at stimulating lending, boosting economic activity, and lowering borrowing costs for both individuals and businesses. What is the repo rate, and why does it matter? The repo rate is the rate at which the RBI lends money to commercial banks. A lower repo rate means banks can borrow funds more cheaply. This, in turn, usually leads banks to reduce interest rates on loans to customers—impacting everything from home loans to auto and personal loans. Retail floating-rate loans issued after October 2019 are linked to external benchmarks, usually the repo rate, which means that EMIs (equated monthly instalments) adjust according to changes in the repo rate. Domestic banks typically pass on these rate cuts to borrowers either fully or partially, depending on their interest reset cycle, which generally occurs within three to six months. How much will borrowers save? If banks fully pass on the 50 bps cut, the savings for borrowers could be substantial: Home loan of ₹50 lakh at 8.70 per cent for 30 years: Current EMI: ₹39,136 Interest rate drops by 50 bps to 8.20 per cent: New EMI: ₹37,346 Monthly Savings: ₹1,790 Annual Savings: ₹21,480 While the monthly savings might not seem like much, over a 30-year term, even small monthly savings add up to lakhs of rupees and bring real long-term financial relief. Now let's say you took a car loan or a personal loan of ₹5 lakh at 12 per cent for 5 years: Current EMI: ₹11,122 Interest rate drops by 50 bps to 11.50 per cent: New EMI: ₹10,963 Monthly Savings: ₹159 Annual Savings: ₹1,908 Borrowers can choose to enjoy the lower EMIs or retain their existing payments and shorten the loan tenure, reducing overall interest paid. Impact on FD Investors While the move is positive for borrowers, it could hurt bank fixed deposit (FD) investors. As the RBI’s lending rates drop, banks are expected to reduce FD rates across various tenures, leading to lower returns. Financial advisors suggest locking in current FD rates before they decline or considering alternatives like post office small savings schemes. The RBI’s aggressive rate cut comes amid cooling inflation and global uncertainty. It aims to support domestic consumption and revive credit growth. Borrowers are advised to watch how their banks react to the transmission of rate cuts. For those with existing loans or planning to borrow, the current environment presents a golden opportunity to ease financial pressure or invest in big-ticket purchases like homes or vehicles.

A lower repo rate usually leads banks to reduce interest rates on loans to customers—impacting everything from home loans to auto and personal loans.

RBI’s repo rate cut: What it means for your loans and FD?

In a significant move aimed at bolstering growth amid a benign inflation outlook, the Reserve Bank of India (RBI) on June 6 slashed the repo rate by 50 basis points (bps) to 5.50 per cent from 6 per cent.This marks the third consecutive rate cut by the RBI’s Monetary Policy Committee (MPC), bringing the cumulative reduction to 100 bps since February 2025. The central bank also announced a shift in its policy stance from ‘accommodative’ to ‘neutral’.RBI Governor Sanjay Malhotra said the front-loaded rate cut was necessitated by a clear moderation in inflation and persistent global uncertainties impacting domestic growth.He noted that “inflation has softened significantly over the last six months”, with the latest Consumer Price Index (CPI) reading at 3.2 per cent, well below RBI’s 4 per cent target.&nbsp;“The near-term and medium-term outlook gives us confidence of a durable alignment of inflation with the target. It may even undershoot the margin,” Malhotra said.<h2>GDP growth forecast unchanged</h2>Despite the rate cut, the RBI maintained its FY26 GDP growth forecast at 6.5 per cent, citing resilience in domestic activity. Private consumption remains healthy, and both the services and agriculture sectors are expected to sustain momentum.RBI also kept the quarterly projections unchanged at 6.5 per cent for Q1, 6.7 per cent for Q2, 6.6 per cent for Q3 and 6.3 per cent for Q4.This is in comparison with Moody’s Ratings’ Indian economic growth projection between 5.5 per cent to 6.5 per cent and the IMF’s projection of 6.2 per cent for the calendar year 2025.Malhotra noted strong performance in merchandise exports in April and a revival in investment activity. He acknowledged that while rural demand is steady, urban demand is showing signs of further improvement.<h2>Inflation outlook revised downward</h2>The RBI has sharply revised its FY26 inflation projection down to 3.7 per cent rom the previous estimate of 4 per cent. According to the governor, food prices have eased and core inflation remains subdued.Quarterly inflation forecasts have also been moderated:Q1 FY26: 2.9 per cent (down from 3.6 per cent)Q2 FY26: 3.4 per cent (down from 3.9 per cent)Q3 FY26: 3.9 per cent (unchanged)Q4 FY26: 4.4 per cent (unchanged)The RBI attributed the outlook to a likely above-normal monsoon, record wheat production, and easing global commodity prices.However, he also warned of risks from weather uncertainties and volatile global trade conditions.<h2>CRR cut to inject liquidity</h2>In a surprise move, the RBI also announced a 100 bps cut in the Cash Reserve Ratio (CRR) to 3 per cent, which will release ₹2.5 lakh crore ($291 billion) of primary liquidity into the system.This reduction in CRR will be done in four tranches. The step is expected to reduce the cost of funds for banks and support more effective transmission of monetary policy.“This CRR cut will not only augment durable liquidity but also improve funding conditions for businesses and consumers alike,” Malhotra said.While the RBI's tone was broadly optimistic, it flagged multiple risks, including fragile global trade, rising geopolitical tensions, and uncertainties related to AI-driven disruptions in financial markets. Malhotra emphasised the need for constant vigilance and data-driven decision-making.“We have very limited space left for further monetary accommodation. From here, every move will depend on incoming data and evolving macroeconomic realities,” he added.Indian stock markets welcomed the announcement, with benchmark indices the Sensex and the Nifty 50 both rising nearly 0.7% at 11:00 am IST.

RBI Governor Sanjay Malhotra said the front-loaded rate cut was necessitated by a clear moderation in inflation and persistent global uncertainties impacting domestic growth.

In a significant move aimed at bolstering growth amid a benign inflation outlook, the Reserve Bank of India (RBI) on June 6 slashed the repo rate by 50 basis points (bps) to 5.50 per cent from 6 per cent. This marks the third consecutive rate cut by the RBI’s Monetary Policy Committee (MPC), bringing the cumulative reduction to 100 bps since February 2025. The central bank also announced a shift in its policy stance from ‘accommodative’ to ‘neutral’. RBI Governor Sanjay Malhotra said the front-loaded rate cut was necessitated by a clear moderation in inflation and persistent global uncertainties impacting domestic growth. He noted that “inflation has softened significantly over the last six months”, with the latest Consumer Price Index (CPI) reading at 3.2 per cent, well below RBI’s 4 per cent target. “The near-term and medium-term outlook gives us confidence of a durable alignment of inflation with the target. It may even undershoot the margin,” Malhotra said. GDP growth forecast unchanged Despite the rate cut, the RBI maintained its FY26 GDP growth forecast at 6.5 per cent, citing resilience in domestic activity. Private consumption remains healthy, and both the services and agriculture sectors are expected to sustain momentum. RBI also kept the quarterly projections unchanged at 6.5 per cent for Q1, 6.7 per cent for Q2, 6.6 per cent for Q3 and 6.3 per cent for Q4. This is in comparison with Moody’s Ratings’ Indian economic growth projection between 5.5 per cent to 6.5 per cent and the IMF’s projection of 6.2 per cent for the calendar year 2025. Malhotra noted strong performance in merchandise exports in April and a revival in investment activity. He acknowledged that while rural demand is steady, urban demand is showing signs of further improvement. Inflation outlook revised downward The RBI has sharply revised its FY26 inflation projection down to 3.7 per cent rom the previous estimate of 4 per cent. According to the governor, food prices have eased and core inflation remains subdued. Quarterly inflation forecasts have also been moderated: Q1 FY26: 2.9 per cent (down from 3.6 per cent) Q2 FY26: 3.4 per cent (down from 3.9 per cent) Q3 FY26: 3.9 per cent (unchanged) Q4 FY26: 4.4 per cent (unchanged) The RBI attributed the outlook to a likely above-normal monsoon, record wheat production, and easing global commodity prices. However, he also warned of risks from weather uncertainties and volatile global trade conditions. CRR cut to inject liquidity In a surprise move, the RBI also announced a 100 bps cut in the Cash Reserve Ratio (CRR) to 3 per cent, which will release ₹2.5 lakh crore ($291 billion) of primary liquidity into the system. This reduction in CRR will be done in four tranches. The step is expected to reduce the cost of funds for banks and support more effective transmission of monetary policy. “This CRR cut will not only augment durable liquidity but also improve funding conditions for businesses and consumers alike,” Malhotra said. While the RBI's tone was broadly optimistic, it flagged multiple risks, including fragile global trade, rising geopolitical tensions, and uncertainties related to AI-driven disruptions in financial markets. Malhotra emphasised the need for constant vigilance and data-driven decision-making. “We have very limited space left for further monetary accommodation. From here, every move will depend on incoming data and evolving macroeconomic realities,” he added. Indian stock markets welcomed the announcement, with benchmark indices the Sensex and the Nifty 50 both rising nearly 0.7% at 11:00 am IST.

RBI Governor Sanjay Malhotra said the front-loaded rate cut was necessitated by a clear moderation in inflation and persistent global uncertainties impacting domestic growth.

Rate cut hat-trick: RBI goes big with 0.5% cut, stance turns neutral

The US labour market showed a mixed picture in April, with job openings increasing slightly while layoffs ticked higher, signalling a potential shift towards a slower economy.According to the latest Job Openings and Labor Turnover Survey (JOLTS) report from the Bureau of Labor Statistics (BLS), available positions rose by 191,000 to 7.39 million by the end of April, up from 7.20 million in the previous month, surpassing analysts’ expectations.Economists had forecast 7.10 million openings, but the increase in vacancies was largely driven by sectors such as health care and social assistance.However, not all industries experienced growth in job openings. Manufacturing, accommodation, and food services saw a decline in available positions, and state and local government education also showed a noticeable drop. The overall picture was one of stability, with job openings fluctuating within a narrow range of 7 million to 8 million for the past year.Hiring increased slightly in April, rising by 169,000 to a total of 5.57 million, but the pace of new jobs was still far below the pace set earlier in 2022. While the rise in hiring may seem encouraging, the number of layoffs surged to 1.78 million, a worrying sign that companies could be trimming their workforces in response to mounting economic pressures.<h2>Tariff uncertainty and its impact on the job market</h2>One major factor affecting the labour market is the ongoing trade war and the tariffs imposed by the Trump administration. The uncertainty surrounding these import duties has left businesses struggling to plan for the future.Last week, a US trade court blocked most of Trump’s tariffs, only for them to be reinstated by a federal appeals court. Economists say that businesses remain in limbo, unsure of whether the tariffs will be sustained or further escalated, which could affect their hiring and investment plans.The tariffs have already had a dampening effect on business sentiment, contributing to the slower pace of hiring and increasing layoffs. Consumers are also feeling the effects, with growing concern over the labour market’s future.The Conference Board’s labour market differential, a measure of the difference between jobs available and the number of unemployed workers, has narrowed considerably in recent months. The increasing uncertainty, combined with fears of rising prices due to tariffs, has weighed on consumer confidence and expectations for future job growth.<h2>Stagflation fears push Fed’s “wait and see” stance</h2>The Federal Reserve has taken a cautious approach to the current economic climate, particularly in light of the growing risks of stagflation—a combination of high inflation, slow economic growth and rising unemployment.Although the labour market remains relatively strong, inflationary pressures and higher tariffs have created a complicated economic backdrop. Federal Reserve Chairman Jerome Powell recently acknowledged that while the economy is still in a “strong position”, there is a looming risk of stagflation if the tariff-driven uncertainty continues to rise.At its most recent meeting in May 2025, the Fed opted to keep its benchmark interest rate steady, citing the need for more time to assess the impact of tariffs and a slowing economy. While the job market is still adding positions, the rise in layoffs and decline in voluntary quits suggest that employees are becoming more cautious about leaving their current roles.The Federal Reserve, under Powell’s leadership, has long been focused on supporting maximum employment while keeping inflation under control. However, if stagflation takes hold, the Fed may face a difficult dilemma, as rising unemployment could be met with an increase in inflation.The uncertainty surrounding tariffs is complicating the Fed’s decision-making process. Powell has emphasised the Fed’s “wait and see” approach, stating that it is too early to determine the full economic impact of the ongoing trade war.If tariffs remain high and inflation continues to rise, the economy could slow down further, leading to job losses that could offset the gains made in the labour market.While the Federal Reserve has been able to maintain a delicate balance so far, economists are closely watching for any signs of a sustained weakening in job growth or rising inflation.Powell made it clear that, at this point, the central bank is in a good position to observe and adjust as the situation evolves. However, if stagflation becomes a persistent issue, the Fed may be forced to take more aggressive action, something that could bring even greater economic uncertainty in the months ahead.While the JOLTS report brings a glimmer of hope for the US economy as job openings rose, but layoffs also remain high. The upcoming May jobs report will be a key indicator of how the labour market is reacting to these shifting dynamics.If hiring continues to slow and layoffs increase, it could signal that the US economy is entering a period of stagnation, potentially leading to more cautious policies from the Federal Reserve.

While the rise in hiring may seem encouraging, the number of layoffs surged to 1.78 million, a worrying sign that companies could be trimming their workforces in response to mounting economic pressures.

The US labour market showed a mixed picture in April, with job openings increasing slightly while layoffs ticked higher, signalling a potential shift towards a slower economy. According to the latest Job Openings and Labor Turnover Survey (JOLTS) report from the Bureau of Labor Statistics (BLS), available positions rose by 191,000 to 7.39 million by the end of April, up from 7.20 million in the previous month, surpassing analysts’ expectations. Economists had forecast 7.10 million openings, but the increase in vacancies was largely driven by sectors such as health care and social assistance. However, not all industries experienced growth in job openings. Manufacturing, accommodation, and food services saw a decline in available positions, and state and local government education also showed a noticeable drop. The overall picture was one of stability, with job openings fluctuating within a narrow range of 7 million to 8 million for the past year. Hiring increased slightly in April, rising by 169,000 to a total of 5.57 million, but the pace of new jobs was still far below the pace set earlier in 2022. While the rise in hiring may seem encouraging, the number of layoffs surged to 1.78 million, a worrying sign that companies could be trimming their workforces in response to mounting economic pressures. Tariff uncertainty and its impact on the job market One major factor affecting the labour market is the ongoing trade war and the tariffs imposed by the Trump administration. The uncertainty surrounding these import duties has left businesses struggling to plan for the future. Last week, a US trade court blocked most of Trump’s tariffs, only for them to be reinstated by a federal appeals court. Economists say that businesses remain in limbo, unsure of whether the tariffs will be sustained or further escalated, which could affect their hiring and investment plans. The tariffs have already had a dampening effect on business sentiment, contributing to the slower pace of hiring and increasing layoffs. Consumers are also feeling the effects, with growing concern over the labour market’s future. The Conference Board’s labour market differential, a measure of the difference between jobs available and the number of unemployed workers, has narrowed considerably in recent months. The increasing uncertainty, combined with fears of rising prices due to tariffs, has weighed on consumer confidence and expectations for future job growth. Stagflation fears push Fed’s “wait and see” stance The Federal Reserve has taken a cautious approach to the current economic climate, particularly in light of the growing risks of stagflation—a combination of high inflation, slow economic growth and rising unemployment. Although the labour market remains relatively strong, inflationary pressures and higher tariffs have created a complicated economic backdrop. Federal Reserve Chairman Jerome Powell recently acknowledged that while the economy is still in a “strong position”, there is a looming risk of stagflation if the tariff-driven uncertainty continues to rise. At its most recent meeting in May 2025, the Fed opted to keep its benchmark interest rate steady, citing the need for more time to assess the impact of tariffs and a slowing economy. While the job market is still adding positions, the rise in layoffs and decline in voluntary quits suggest that employees are becoming more cautious about leaving their current roles. The Federal Reserve, under Powell’s leadership, has long been focused on supporting maximum employment while keeping inflation under control. However, if stagflation takes hold, the Fed may face a difficult dilemma, as rising unemployment could be met with an increase in inflation. The uncertainty surrounding tariffs is complicating the Fed’s decision-making process. Powell has emphasised the Fed’s “wait and see” approach, stating that it is too early to determine the full economic impact of the ongoing trade war. If tariffs remain high and inflation continues to rise, the economy could slow down further, leading to job losses that could offset the gains made in the labour market. While the Federal Reserve has been able to maintain a delicate balance so far, economists are closely watching for any signs of a sustained weakening in job growth or rising inflation. Powell made it clear that, at this point, the central bank is in a good position to observe and adjust as the situation evolves. However, if stagflation becomes a persistent issue, the Fed may be forced to take more aggressive action, something that could bring even greater economic uncertainty in the months ahead. While the JOLTS report brings a glimmer of hope for the US economy as job openings rose, but layoffs also remain high. The upcoming May jobs report will be a key indicator of how the labour market is reacting to these shifting dynamics. If hiring continues to slow and layoffs increase, it could signal that the US economy is entering a period of stagnation, potentially leading to more cautious policies from the Federal Reserve.

While the rise in hiring may seem encouraging, the number of layoffs surged to 1.78 million, a worrying sign that companies could be trimming their workforces in response to mounting economic pressures.

US labour market shows signs of cooling amid growing stagflation fears

At the Confederation of Indian Industry (CII) Annual Business Summit 2025, Defence Minister Rajnath Singh took the stage to unveil significant strides in India’s defence sector, with particular emphasis on the country’s growing self-reliance under the ‘Make in India’ initiative.The highlight of the minister’s speech was the government’s approval for the Advanced Medium Combat Aircraft (AMCA) project, a critical step in advancing India’s capabilities in the fifth-generation fighter aircraft domain.Singh hailed the AMCA as a “milestone”, stressing that it places India among the select few nations with the technological edge to develop fifth-gen fighter jets. The project, which will see the creation of five prototypes, is set to undergo series production, with the government-run Hindustan Aeronautics Limited (HAL) joining forces with private sector companies in a collaborative effort.The inclusion of the private sector for the first time in such a large-scale defence project highlights a new phase in India’s defence manufacturing ecosystem. Singh made it clear that both public and private firms would compete to bring this advanced fighter to fruition, with HAL no longer being the default producer.The AMCA, expected to roll out its first prototype by 2028-29, will be powered by the indigenous General Electric F-414 engine. It will feature advanced technologies like an internal weapons bay and diverterless supersonic intake, developed indigenously, marking a new era of technological autonomy for India. With China and Pakistan already deploying fifth-gen aircraft, the AMCA project is critical for India to maintain its technological edge and ensure security along its borders.&nbsp;India’s rising economic might&nbsp;Beyond defence, Singh also highlighted India’s economic achievements, noting that the country had ascended to become the world’s fourth-largest economy under Prime Minister Narendra Modi’s leadership. Singh pointed to India’s growing economic might, with the prospect of becoming the third-largest global economy soon, as a sign of India’s increasing influence on the world stage.At the same time, India’s defence sector has witnessed a remarkable transformation. Singh reported that the country’s defence production has more than tripled over the past decade, rising from ₹43,000 crore ($5.03 billion) to ₹1,46,000 crore ($17.08 billion), with a significant contribution from the private sector. Defence exports have surged, crossing ₹24,000 crore ($2.8 billion), with Indian-made weapons and systems now reaching 100 countries.“The involvement of over 16,000 MSMEs in the defence sector is strengthening our self-reliance and providing employment to millions,” Singh stated, highlighting how India’s burgeoning defence manufacturing sector is both an economic and strategic asset. Additionally, India’s rising capabilities in artificial intelligence, cyber defence, and space-based security were acknowledged as critical areas in the modernisation of India’s armed forces.Singh’s comments underscored the evolving strategic and economic landscape of India, wherein the dual pillars of military self-sufficiency and economic strength are becoming increasingly intertwined. As the country continues its growth trajectory, both on the economic front and in its security capabilities, Singh emphasised that India must ensure its defence industry aligns with national interests, positioning itself as a hub for advanced technologies in the years to come.Reaffirming India’s sovereignty over PoK, Singh also said, “We believe that people living in PoK will, sooner or later, voluntarily reunite with India.”“Prime Minister Narendra Modi-led government is committed to its resolve of Ek Bharat Shreshtha Bharat. Most of the people in PoK have a deep connection with India. There are only a few who have been misled,” he said.In closing, Singh reiterated that India’s increasing power would serve as a beacon of security and prosperity, both for the nation and the broader global community.

Defence Minister Rajnath Singh stated that AMCA places India among the select few nations with the technological edge to develop fifth-gen fighter jets

At the Confederation of Indian Industry (CII) Annual Business Summit 2025, Defence Minister Rajnath Singh took the stage to unveil significant strides in India’s defence sector, with particular emphasis on the country’s growing self-reliance under the ‘Make in India’ initiative. The highlight of the minister’s speech was the government’s approval for the Advanced Medium Combat Aircraft (AMCA) project, a critical step in advancing India’s capabilities in the fifth-generation fighter aircraft domain. Singh hailed the AMCA as a “milestone”, stressing that it places India among the select few nations with the technological edge to develop fifth-gen fighter jets. The project, which will see the creation of five prototypes, is set to undergo series production, with the government-run Hindustan Aeronautics Limited (HAL) joining forces with private sector companies in a collaborative effort. The inclusion of the private sector for the first time in such a large-scale defence project highlights a new phase in India’s defence manufacturing ecosystem. Singh made it clear that both public and private firms would compete to bring this advanced fighter to fruition, with HAL no longer being the default producer. The AMCA, expected to roll out its first prototype by 2028-29, will be powered by the indigenous General Electric F-414 engine. It will feature advanced technologies like an internal weapons bay and diverterless supersonic intake, developed indigenously, marking a new era of technological autonomy for India. With China and Pakistan already deploying fifth-gen aircraft, the AMCA project is critical for India to maintain its technological edge and ensure security along its borders. India’s rising economic might Beyond defence, Singh also highlighted India’s economic achievements, noting that the country had ascended to become the world’s fourth-largest economy under Prime Minister Narendra Modi’s leadership. Singh pointed to India’s growing economic might, with the prospect of becoming the third-largest global economy soon, as a sign of India’s increasing influence on the world stage. At the same time, India’s defence sector has witnessed a remarkable transformation. Singh reported that the country’s defence production has more than tripled over the past decade, rising from ₹43,000 crore ($5.03 billion) to ₹1,46,000 crore ($17.08 billion), with a significant contribution from the private sector. Defence exports have surged, crossing ₹24,000 crore ($2.8 billion), with Indian-made weapons and systems now reaching 100 countries. “The involvement of over 16,000 MSMEs in the defence sector is strengthening our self-reliance and providing employment to millions,” Singh stated, highlighting how India’s burgeoning defence manufacturing sector is both an economic and strategic asset. Additionally, India’s rising capabilities in artificial intelligence, cyber defence, and space-based security were acknowledged as critical areas in the modernisation of India’s armed forces. Singh’s comments underscored the evolving strategic and economic landscape of India, wherein the dual pillars of military self-sufficiency and economic strength are becoming increasingly intertwined. As the country continues its growth trajectory, both on the economic front and in its security capabilities, Singh emphasised that India must ensure its defence industry aligns with national interests, positioning itself as a hub for advanced technologies in the years to come. Reaffirming India’s sovereignty over PoK, Singh also said, “We believe that people living in PoK will, sooner or later, voluntarily reunite with India.” “Prime Minister Narendra Modi-led government is committed to its resolve of Ek Bharat Shreshtha Bharat. Most of the people in PoK have a deep connection with India. There are only a few who have been misled,” he said. In closing, Singh reiterated that India’s increasing power would serve as a beacon of security and prosperity, both for the nation and the broader global community.

Defence Minister Rajnath Singh stated that AMCA places India among the select few nations with the technological edge to develop fifth-gen fighter jets.

Approval of AMCA project is a milestone in India’s defence capability building: Rajnath Singh

United States President Donald Trump has reignited trade tensions with a dramatic tariff threat against Apple Inc., warning that all iPhones and smartphones sold in the US but not manufactured locally could soon face a 25 per cent import duty.“I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a tariff of at least 25 per cent must be paid by Apple to the US,” Trump said in a Truth Social post.During a White House press event, Trump confirmed the tariffs would extend to all smartphone brands, including South Korea’s Samsung, declaring, “It would be also Samsung and anybody that makes that product. Otherwise, it wouldn’t be fair.” He added that the tariffs could take effect by the end of June.The announcement sent Apple shares tumbling nearly 3 per cent on May 23, deepening a stock decline of over 20 per cent since Trump returned to office.Recently, in a series of public statements and a post on Truth Social, Trump insisted that Apple must relocate its iPhone assembly operations to the United States, rejecting its current production strategies that prioritise China and increasingly, India.&nbsp;Rise of India as Apple’s new factory hub&nbsp;As Apple continues to diversify its supply chain away from China amid geopolitical tensions and rising costs, India has rapidly emerged as a key manufacturing alternative. According to India’s Commerce Ministry data, Apple assembled $22 billion worth of iPhones in India in FY25 (April 2024 to March 2025)—a 60 per cent increase from the previous year. India now accounts for 18 per cent of global iPhone output, up from just 7 per cent in 2022, and is projected to hit 32 per cent by the end of 2025.This growth is fuelled by major investments from Apple suppliers. Foxconn recently announced a $1.5 billion investment in a new component facility in Tamil Nadu, expected to create 14,000 jobs. Tata Electronics is also scaling up its assembly operations as Apple aims to produce all 60 million US-bound iPhones in India by next year.“India remains the only potential big manufacturing destination beyond China,” said Tarun Pathak, Research Director at Counterpoint, in an interview with&nbsp;Moneycontrol. He noted that the US lacks the necessary supply chain density, adding, “Even with subsidies, it would take 2-3 years to shift production meaningfully.”&nbsp;Supply chain realities&nbsp;The tariff threat has sparked concerns over rising costs for American consumers. Apple CEO Tim Cook has previously warned that tariffs would ultimately raise handset prices and disproportionately affect middle-class consumers.Despite the political pressure, analysts argue that moving production to the US is neither simple nor economically viable in the near term. According to a report by the Global Trade Research Institute (GTRI), the final assembly of an iPhone, which is done in China and India, contributes less than 3 per cent to its retail value—about $30 out of a $1,000 device.The GTRI report stated that each $1000 iPhone carries the imprint of at least a dozen countries. Apple, through its software, design, and brand, claims the lion’s share of the value, about $450 per device. US component makers such as Qualcomm and Broadcom add another $80.Taiwan earns $150 for chip manufacturing, South Korea adds $90 for OLED (organic light-emitting diode) screens and memory chips, and Japan contributes $85, mainly via camera systems. Other countries like Germany, Vietnam, and Malaysia account for a modest $45 through smaller parts.Repatriating iPhone assembly to the US would create jobs—an estimated 60,000 from India and possibly over 300,000 jobs if production also leaves China. However, labour costs in the US are significantly higher, with minimum monthly wages nearing $2,900, which is more than 12 times higher compared to $230 in India.As a result, the cost of assembling each iPhone in the US would surge from $30 to nearly $390, severely cutting Apple’s per-device profit from $450 to about $60 unless retail prices soar.Ming-Chi Kuo, an analyst with TF International Securities, wrote on X, “In terms of profitability, it’s way better for Apple to take the hit of a 25 per cent tariff on iPhones sold in the US market than to move iPhone assembly lines back to the US.”&nbsp;Strategic consequences&nbsp;Trump’s tariff stance comes at a sensitive time as India and the US are negotiating a bilateral trade agreement (BTA) during a 90-day pause in a previously announced reciprocal tariff.Although the 25 per cent tariff threat is not specifically directed at India, its rapid rise as Apple’s production hub places it in the spotlight.Ironically, the GTRI report argues that if iPhone assembly were to leave India, the country might benefit in the long term. By ceasing shallow assembly practices driven by subsidies and instead investing in core manufacturing technologies, like chipmaking and display production, India could move up the value chain.The report pointed out that India earns less than $30 per iPhone, much of which is returned to Apple through production-linked incentives (PLIs). Moving assembly out might force India to focus on deeper manufacturing capabilities.Meanwhile, Trump’s broader industrial strategy is clear: boost US employment and cut the trade deficit. Commerce Secretary Howard Lutnick recently commented on the technological gap, noting that Apple CEO Tim Cook told him iPhone assembly can’t move to the US until robotic automation meets Apple’s standards.“He (Tim Cook) said, I need to have the robotic arms, right, do it at a scale and precision that I could bring it here,” Lutnick told&nbsp;CNBC. “And the day I see that available, it’s coming here.”As the June deadline for the tariffs looms, Apple faces an urgent choice: absorb the cost, shift strategy, or pass it on to consumers, all while navigating the stormy waters of global trade and domestic politics.

Apple faces an urgent choice: absorb the cost, shift strategy, or pass it on to consumers, all while navigating the stormy waters of global trade and domestic politics.

United States President Donald Trump has reignited trade tensions with a dramatic tariff threat against Apple Inc., warning that all iPhones and smartphones sold in the US but not manufactured locally could soon face a 25 per cent import duty. “I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else. If that is not the case, a tariff of at least 25 per cent must be paid by Apple to the US,” Trump said in a Truth Social post. During a White House press event, Trump confirmed the tariffs would extend to all smartphone brands, including South Korea’s Samsung, declaring, “It would be also Samsung and anybody that makes that product. Otherwise, it wouldn’t be fair.” He added that the tariffs could take effect by the end of June. The announcement sent Apple shares tumbling nearly 3 per cent on May 23, deepening a stock decline of over 20 per cent since Trump returned to office. Recently, in a series of public statements and a post on Truth Social, Trump insisted that Apple must relocate its iPhone assembly operations to the United States, rejecting its current production strategies that prioritise China and increasingly, India. Rise of India as Apple’s new factory hub As Apple continues to diversify its supply chain away from China amid geopolitical tensions and rising costs, India has rapidly emerged as a key manufacturing alternative. According to India’s Commerce Ministry data, Apple assembled $22 billion worth of iPhones in India in FY25 (April 2024 to March 2025)—a 60 per cent increase from the previous year. India now accounts for 18 per cent of global iPhone output, up from just 7 per cent in 2022, and is projected to hit 32 per cent by the end of 2025. This growth is fuelled by major investments from Apple suppliers. Foxconn recently announced a $1.5 billion investment in a new component facility in Tamil Nadu, expected to create 14,000 jobs. Tata Electronics is also scaling up its assembly operations as Apple aims to produce all 60 million US-bound iPhones in India by next year. “India remains the only potential big manufacturing destination beyond China,” said Tarun Pathak, Research Director at Counterpoint, in an interview with Moneycontrol. He noted that the US lacks the necessary supply chain density, adding, “Even with subsidies, it would take 2-3 years to shift production meaningfully.” Supply chain realities The tariff threat has sparked concerns over rising costs for American consumers. Apple CEO Tim Cook has previously warned that tariffs would ultimately raise handset prices and disproportionately affect middle-class consumers. Despite the political pressure, analysts argue that moving production to the US is neither simple nor economically viable in the near term. According to a report by the Global Trade Research Institute (GTRI), the final assembly of an iPhone, which is done in China and India, contributes less than 3 per cent to its retail value—about $30 out of a $1,000 device. The GTRI report stated that each $1000 iPhone carries the imprint of at least a dozen countries. Apple, through its software, design, and brand, claims the lion’s share of the value, about $450 per device. US component makers such as Qualcomm and Broadcom add another $80. Taiwan earns $150 for chip manufacturing, South Korea adds $90 for OLED (organic light-emitting diode) screens and memory chips, and Japan contributes $85, mainly via camera systems. Other countries like Germany, Vietnam, and Malaysia account for a modest $45 through smaller parts. Repatriating iPhone assembly to the US would create jobs—an estimated 60,000 from India and possibly over 300,000 jobs if production also leaves China. However, labour costs in the US are significantly higher, with minimum monthly wages nearing $2,900, which is more than 12 times higher compared to $230 in India. As a result, the cost of assembling each iPhone in the US would surge from $30 to nearly $390, severely cutting Apple’s per-device profit from $450 to about $60 unless retail prices soar. Ming-Chi Kuo, an analyst with TF International Securities, wrote on X, “In terms of profitability, it’s way better for Apple to take the hit of a 25 per cent tariff on iPhones sold in the US market than to move iPhone assembly lines back to the US.” Strategic consequences Trump’s tariff stance comes at a sensitive time as India and the US are negotiating a bilateral trade agreement (BTA) during a 90-day pause in a previously announced reciprocal tariff. Although the 25 per cent tariff threat is not specifically directed at India, its rapid rise as Apple’s production hub places it in the spotlight. Ironically, the GTRI report argues that if iPhone assembly were to leave India, the country might benefit in the long term. By ceasing shallow assembly practices driven by subsidies and instead investing in core manufacturing technologies, like chipmaking and display production, India could move up the value chain. The report pointed out that India earns less than $30 per iPhone, much of which is returned to Apple through production-linked incentives (PLIs). Moving assembly out might force India to focus on deeper manufacturing capabilities. Meanwhile, Trump’s broader industrial strategy is clear: boost US employment and cut the trade deficit. Commerce Secretary Howard Lutnick recently commented on the technological gap, noting that Apple CEO Tim Cook told him iPhone assembly can’t move to the US until robotic automation meets Apple’s standards. “He (Tim Cook) said, I need to have the robotic arms, right, do it at a scale and precision that I could bring it here,” Lutnick told CNBC. “And the day I see that available, it’s coming here.” As the June deadline for the tariffs looms, Apple faces an urgent choice: absorb the cost, shift strategy, or pass it on to consumers, all while navigating the stormy waters of global trade and domestic politics.

Apple faces an urgent choice: absorb the cost, shift strategy, or pass it on to consumers, all while navigating the stormy waters of global trade and domestic politics.

iPhones made in India, trouble made in D.C.

The Supreme Court of India on May 19 strongly criticised the central government for its prolonged failure to bring a clear regulatory framework for cryptocurrencies, stating that the absence of such a framework has created a breeding ground for “misuse”.The apex court reiterated its earlier observation that unregulated Bitcoin trading is “nothing but a more polished form of Hawala”, an illegal informal money transfer system.A bench of Justices Surya Kant and N. Kotiswar Singh made these remarks while hearing a bail petition filed by Shailesh Babulal Bhatt, a Gujarat resident accused of multi-state cryptocurrency-related fraud.While the bail plea itself was not directly related to broader policy, the bench expressed grave concerns about the lack of regulation in the crypto sector. They questioned why the Enforcement Directorate (ED), the prosecuting agency, chose to arrest Bhatt after completing its probe when he was not arrested during the ongoing investigation.&nbsp;Call for regulation, not ban&nbsp;The Supreme Court reminded the government that nearly two years ago, it had sought clarity on India’s policy regarding virtual currencies. The bench emphasised that outright banning cryptocurrencies would be unwise, especially as new financial mechanisms are evolving in global trade, but stressed that some form of regulation is absolutely essential. The top court asserted that the government’s failure to regulate this space amounted to turning a “blind eye” to a pressing issue.“Nobody is saying to stop it since you have said earlier that cryptocurrency is not illegal and banning it will not be wise for the economy. Banning may be shutting your eyes to the ground reality. But what about regulating it?” Justice Kant remarked.Additional Solicitor General Aishwarya Bhati, representing the Union, sought time to obtain instructions on the matter. The Court also highlighted the practical and evidentiary challenges law enforcement faces in the absence of a legal definition or framework for crypto assets. “If tomorrow somebody asks, ‘Prove what is this asset, how are we going to prove it?’ We are not experts. Experts will have to examine it, but some steps to regulate it are necessary. We are told crypto trading is very volatile... today a Bitcoin might be worth lakhs, and tomorrow it can mean nothing,” the bench observed.Senior advocate Mukul Rohatgi, representing Bhatt, argued that Bitcoin trading is not illegal in India, citing the Supreme Court’s 2020 decision that struck down a Reserve Bank of India (RBI) circular barring banks from facilitating crypto-related transactions. He contended that Bhatt's arrest was unjustified given the absence of a law explicitly banning such activity.ASG Bhati informed the Court that an updated report on the investigation progress and the Centre’s position on cryptocurrency would be submitted by July.Currently, India imposes a flat 30 per cent tax on profits from cryptocurrency transactions and a 1 per cent tax deducted at source on every trade. However, cryptocurrencies like Bitcoin and Ethereum are neither recognised as legal tender nor banned outright.Manvinder Singh, Partner, JSA Advocates &amp; Solicitors believes that “The Supreme Court’s remark reinforces the importance of striking a balance between innovation and regulatory oversight. It reflects a broader understanding that as the crypto market continues to mature, it’s important for the legal and regulatory system to keep pace and provide a robust, future-ready framework that ensures investor protection, market integrity, and innovation.”The RBI has repeatedly warned of the risks associated with crypto investments, even as it promotes the Digital Rupee, a central bank digital currency. A draft bill to regulate cryptocurrencies was prepared in 2021 but is yet to be tabled in Parliament.This is not the first time the Supreme Court has flagged the issue. In July 2023, another bench had directed the union government to clarify whether it intended to “set up a federal agency to investigate criminal cases involving cryptocurrencies,” lamenting the lack of both a regulatory law and an expert agency to probe such matters.&nbsp;(With inputs from agencies)

SC said Center's prolonged failure to bring a clear regulatory framework for cryptocurrencies has created a breeding ground for misuse

The Supreme Court of India on May 19 strongly criticised the central government for its prolonged failure to bring a clear regulatory framework for cryptocurrencies, stating that the absence of such a framework has created a breeding ground for “misuse”. The apex court reiterated its earlier observation that unregulated Bitcoin trading is “nothing but a more polished form of Hawala”, an illegal informal money transfer system. A bench of Justices Surya Kant and N. Kotiswar Singh made these remarks while hearing a bail petition filed by Shailesh Babulal Bhatt, a Gujarat resident accused of multi-state cryptocurrency-related fraud. While the bail plea itself was not directly related to broader policy, the bench expressed grave concerns about the lack of regulation in the crypto sector. They questioned why the Enforcement Directorate (ED), the prosecuting agency, chose to arrest Bhatt after completing its probe when he was not arrested during the ongoing investigation. Call for regulation, not ban The Supreme Court reminded the government that nearly two years ago, it had sought clarity on India’s policy regarding virtual currencies. The bench emphasised that outright banning cryptocurrencies would be unwise, especially as new financial mechanisms are evolving in global trade, but stressed that some form of regulation is absolutely essential. The top court asserted that the government’s failure to regulate this space amounted to turning a “blind eye” to a pressing issue. “Nobody is saying to stop it since you have said earlier that cryptocurrency is not illegal and banning it will not be wise for the economy. Banning may be shutting your eyes to the ground reality. But what about regulating it?” Justice Kant remarked. Additional Solicitor General Aishwarya Bhati, representing the Union, sought time to obtain instructions on the matter. The Court also highlighted the practical and evidentiary challenges law enforcement faces in the absence of a legal definition or framework for crypto assets. “If tomorrow somebody asks, ‘Prove what is this asset, how are we going to prove it?’ We are not experts. Experts will have to examine it, but some steps to regulate it are necessary. We are told crypto trading is very volatile... today a Bitcoin might be worth lakhs, and tomorrow it can mean nothing,” the bench observed. Senior advocate Mukul Rohatgi, representing Bhatt, argued that Bitcoin trading is not illegal in India, citing the Supreme Court’s 2020 decision that struck down a Reserve Bank of India (RBI) circular barring banks from facilitating crypto-related transactions. He contended that Bhatt's arrest was unjustified given the absence of a law explicitly banning such activity. ASG Bhati informed the Court that an updated report on the investigation progress and the Centre’s position on cryptocurrency would be submitted by July. Currently, India imposes a flat 30 per cent tax on profits from cryptocurrency transactions and a 1 per cent tax deducted at source on every trade. However, cryptocurrencies like Bitcoin and Ethereum are neither recognised as legal tender nor banned outright. Manvinder Singh, Partner, JSA Advocates & Solicitors believes that “The Supreme Court’s remark reinforces the importance of striking a balance between innovation and regulatory oversight. It reflects a broader understanding that as the crypto market continues to mature, it’s important for the legal and regulatory system to keep pace and provide a robust, future-ready framework that ensures investor protection, market integrity, and innovation.” The RBI has repeatedly warned of the risks associated with crypto investments, even as it promotes the Digital Rupee, a central bank digital currency. A draft bill to regulate cryptocurrencies was prepared in 2021 but is yet to be tabled in Parliament. This is not the first time the Supreme Court has flagged the issue. In July 2023, another bench had directed the union government to clarify whether it intended to “set up a federal agency to investigate criminal cases involving cryptocurrencies,” lamenting the lack of both a regulatory law and an expert agency to probe such matters. (With inputs from agencies)

SC said Center's prolonged failure to bring a clear regulatory framework for cryptocurrencies has created a breeding ground for “misuse”

Supreme Court slams central government for crypto inaction

China's central bank, the People's Bank of China (PBOC), lowered its key lending rates for the first time since October as part of a broader effort to stabilise the country’s economy amid ongoing trade tensions with the United States.&nbsp;On May 20, the PBOC cut the one-year loan prime rate (LPR) by 10 basis points to 3.0 per cent from 3.1 per cent and the five-year LPR by a similar margin to 3.5 per cent from 3.6 per cent. These cuts aim to stimulate consumption, encourage borrowing, and ultimately help offset economic challenges such as weak domestic demand and deflationary pressures.&nbsp;Economic impact&nbsp;The decision to reduce the LPR follows a series of monetary easing measures that the PBOC has been implementing in response to slowing economic growth. The LPR serves as a benchmark for the interest rates charged on loans, including mortgages, and influences both corporate and household borrowing. The one-year LPR, in particular, is vital for short-term loans, while the five-year rate directly impacts mortgage lending, making this decision significant for the housing market.&nbsp;The rate cuts were widely anticipated by analysts, with many forecasting a 10-basis-point reduction. This move comes after a period of escalating trade tensions between the US and China, which had put substantial strain on both economies.&nbsp;However, the recent easing of tensions, following a temporary tariff reduction agreement between the two countries, has provided some breathing room for China to implement its monetary policy. The US and China agreed to roll back tariffs for 90 days, which has raised hopes of a more lasting resolution to the trade war.&nbsp;While the rate cuts are seen as a step in the right direction, economists warn that modest interest rate reductions alone may not be enough to generate substantial economic growth.&nbsp;Strategic policy adjustments&nbsp;In addition to the rate cuts, Chinese authorities have also implemented measures to ease liquidity conditions by lowering the reserve requirement ratio for banks. This move aims to free up more funds for lending and investment, further supporting economic activity.&nbsp;These steps come in the wake of weakening economic indicators, including a sharp decline in new loans, which plummeted by 61 per cent year-over-year in April, signalling diminished confidence in borrowing due to tariff concerns.&nbsp;Morgan Stanley economists told CNBC that stimulus measures are likely to be "lighter and delayed" due to the reduced likelihood of further escalations in the trade war. However, the firm also cautioned that despite the tariff reduction, the US trade-weighted tariff rate on China remains high, which could continue to dampen external demand for Chinese exports and exacerbate domestic overcapacity issues.&nbsp;The decision to cut rates comes as part of a broader economic strategy that includes both monetary and fiscal easing, aimed at navigating the challenges posed by deflation and sluggish domestic consumption. Wholesale prices in China fell sharply in April, marking the steepest drop in six months, and consumer prices have been in decline for three consecutive months, underscoring persistent deflationary pressure.&nbsp;Despite the favourable impact of the trade de-escalation on the yuan, which has strengthened by over 2.8 per cent against the US dollar since reaching a record low last month, the overall economic outlook remains uncertain.&nbsp;As China pushes forward with its stimulus measures, the government's goal of achieving a growth target of around 5 per cent for the year seems increasingly dependent on the success of these policies.&nbsp;The combination of lower interest rates, fiscal stimulus, and trade negotiations presents a delicate balancing act for Beijing, which must navigate deflation, sluggish demand, and trade risks to achieve its growth objectives for 2025. &nbsp;

These cuts aim to stimulate consumption, encourage borrowing, and ultimately help offset economic challenges such as weak domestic demand and deflationary pressures.

China's central bank, the People's Bank of China (PBOC), lowered its key lending rates for the first time since October as part of a broader effort to stabilise the country’s economy amid ongoing trade tensions with the United States. On May 20, the PBOC cut the one-year loan prime rate (LPR) by 10 basis points to 3.0 per cent from 3.1 per cent and the five-year LPR by a similar margin to 3.5 per cent from 3.6 per cent. These cuts aim to stimulate consumption, encourage borrowing, and ultimately help offset economic challenges such as weak domestic demand and deflationary pressures. Economic impact The decision to reduce the LPR follows a series of monetary easing measures that the PBOC has been implementing in response to slowing economic growth. The LPR serves as a benchmark for the interest rates charged on loans, including mortgages, and influences both corporate and household borrowing. The one-year LPR, in particular, is vital for short-term loans, while the five-year rate directly impacts mortgage lending, making this decision significant for the housing market. The rate cuts were widely anticipated by analysts, with many forecasting a 10-basis-point reduction. This move comes after a period of escalating trade tensions between the US and China, which had put substantial strain on both economies. However, the recent easing of tensions, following a temporary tariff reduction agreement between the two countries, has provided some breathing room for China to implement its monetary policy. The US and China agreed to roll back tariffs for 90 days, which has raised hopes of a more lasting resolution to the trade war. While the rate cuts are seen as a step in the right direction, economists warn that modest interest rate reductions alone may not be enough to generate substantial economic growth. Strategic policy adjustments In addition to the rate cuts, Chinese authorities have also implemented measures to ease liquidity conditions by lowering the reserve requirement ratio for banks. This move aims to free up more funds for lending and investment, further supporting economic activity. These steps come in the wake of weakening economic indicators, including a sharp decline in new loans, which plummeted by 61 per cent year-over-year in April, signalling diminished confidence in borrowing due to tariff concerns. Morgan Stanley economists told CNBC that stimulus measures are likely to be "lighter and delayed" due to the reduced likelihood of further escalations in the trade war. However, the firm also cautioned that despite the tariff reduction, the US trade-weighted tariff rate on China remains high, which could continue to dampen external demand for Chinese exports and exacerbate domestic overcapacity issues. The decision to cut rates comes as part of a broader economic strategy that includes both monetary and fiscal easing, aimed at navigating the challenges posed by deflation and sluggish domestic consumption. Wholesale prices in China fell sharply in April, marking the steepest drop in six months, and consumer prices have been in decline for three consecutive months, underscoring persistent deflationary pressure. Despite the favourable impact of the trade de-escalation on the yuan, which has strengthened by over 2.8 per cent against the US dollar since reaching a record low last month, the overall economic outlook remains uncertain. As China pushes forward with its stimulus measures, the government's goal of achieving a growth target of around 5 per cent for the year seems increasingly dependent on the success of these policies. The combination of lower interest rates, fiscal stimulus, and trade negotiations presents a delicate balancing act for Beijing, which must navigate deflation, sluggish demand, and trade risks to achieve its growth objectives for 2025.

On May 20, the Central bank of China cut the one-year loan prime rate (LPR) by 10 basis points to 3.0 per cent from 3.1 per cent and the five-year LPR by a similar margin to 3.5 per cent from 3.6 per cent.&nbsp;

China cuts key lending rates to boost economic recovery amid trade war concerns

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Aarushi Bhargava

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