RBI Rate Cut on Horizon: The wave of relief continues for the common man. After the GST cut, all eyes are now on the Reserve Bank of India (RBI). The reason? The RBI may announce a surprise repo rate cut in the coming days. If this happens, it could ease the burden on people’s EMIs. This news is making headlines as the RBI’s three-day Monetary Policy Committee meeting concludes on October 1.
Market Confusion: Stability or Reduction?
Most market experts expect the RBI to keep the repo rate at its current level of 5.50 percent this time. According to a Reuters survey, nearly three-quarters of economists do not expect any rate changes. In the previous August meeting, the RBI maintained a neutral stance, keeping rates stable. However, this time the picture looks a little different.
Some major global and domestic financial institutions, such as Citi, Barclays, Capital Economics, and the State Bank of India (SBI), believe the RBI could spring a surprise. They argue that investment growth in the country remains sluggish, global trade conditions are poor, and inflation is under control. All these factors together create a favorable environment for a rate cut.
Why is a rate cut likely?
Since the beginning of this year, the RBI has cut the repo rate by a total of 100 basis points. However, private investment has not seen the expected boost. On the other hand, the global situation is becoming more complex. Escalating trade tensions with the United States have become a major concern. The United States has imposed tariffs of up to 50 percent on Indian exports and increased visa fees, which are expected to put pressure on service sector exports.
In a report, Citi economists stated that the October meeting is now live again. They believe the RBI could take two paths. It could either make an “insurance cut” to cushion the economy from external shocks, or it could adopt a “soft stance” and signal that action will be taken in the future.
Growth Data and Ground Reality
India’s economy achieved a robust growth rate of 7.8 percent in the April-June quarter, which is better than expected. However, some analysts believe that this figure may be more superficial than true strength after adjusting for inflation. Capital Economics says that US tariffs could impact the country’s GDP growth rate. Consequently, once inflation is under control, the RBI could initiate another rate cut cycle.
They even predict that the RBI could cut rates as soon as next week, followed by another cut in December. The central government has also taken steps to boost the economy, such as income tax relief and GST rate reductions. However, rising tariffs and a depreciating rupee have made the economic future somewhat uncertain. In such a situation, everyone’s eyes are now fixed on RBI Governor Shaktikanta Das as to what historic decision he takes for the economy in this challenging period.