RBI May Cut Rates by 25 bps to Spur Growth

The Reserve Bank of India (RBI) is expected to cut rates by 25 basis points on Friday.

- ANUPREKSHA JAIN & SACHIN KUMAR

In a poll of 15 economists, 11 expect a 25-bps rate cut this week by the apex bank to complement the Budget's strategy of boosting consumption and investments in the economy. The recent liquidity-easing measures by the RBI have set the stage for a rate cut, say economists.

"We expect the RBI to cut the policy rate by 25 bps, given inflation is likely to moderate in the months ahead and to further complement the Budget's strategy of boosting consumption and investments in the economy," said Sakshi Gupta, principal economist, HDFC Bank. "However, this rate cut should be further complemented with appropriate liquidity-infusing measures to enable better transmission of rate cuts and spur credit growth."

Calls for a rate cut in February have grown louder as the growth this year has been much lower than expected. The GDP growth slowed down to a seven-quarter low of 5.4% for the second quarter ended September 2024, prompting calls for cutting interest rates by the RBI.

During the first half of 2024-25, the real GDP growth moderated to 6%, from 8.2% and 8.1% growth recorded during the first and second halves of 2023-24, respectively.