India's central bank lowered its benchmark interest rate by 25 basis points to 6.25% on Friday, citing easing inflation and the need to support economic growth, while maintaining a neutral policy stance.

The decision by the Reserve Bank of India's Monetary Policy Committee (MPC) was unanimous, with members noting that inflation had moderated from its recent peak and was expected to align with the central bank's 4% target in the medium term.

The standing deposit facility rate was adjusted to 6.00%, while the marginal standing facility rate and the bank rate were set at 6.50%.

India's economy is projected to expand 6.4% in fiscal 2024-25, driven by private consumption and a rebound in the agriculture sector, according to the central bank's estimates.

Growth is expected to improve further to 6.7% in 2025-26, with strong rabi crop prospects and industrial recovery providing support.

Inflation eased to 6.2% in October before falling further in November-December due to a decline in food prices. The RBI expects headline inflation to average 4.8% in fiscal 2024-25 and 4.2% in 2025-26, assuming normal monsoon conditions.

India's economy is forecast to grow 6.4% in the year ending in March, the slowest pace in four years and below the lower end of the government's initial 6.5%-7% projection.

The weaker-than-expected expansion has been attributed to sluggish manufacturing and slower corporate investment.

The National Statistics Office's (NSO) forecast follows a string of disappointing economic indicators in the second half of 2024, including low growth, high inflation, weak capital flows, and a record trade gap, raising concerns about the strength of India's recovery.