The Reserve Bank of India (RBI) is expected to begin cutting its repo rate in April, with a total reduction of 75 basis points anticipated by the end of the 2026 financial year (FY26), according to a recent forecast by India Ratings and Research (Ind-Ra).
The agency predicts that the RBI will initially reduce the repo rate by 25 basis points in April, signaling the start of a gradual easing of monetary policy. This move is expected to be driven by moderating inflation and a need to support economic growth.
Ind-Ra’s analysis suggests that the RBI will likely adopt a cautious approach, implementing rate cuts in a phased manner to ensure inflation remains within its target range. The cumulative 75 basis point reduction, spread across the next two fiscal years, is seen as a measured response to evolving economic conditions.
“We anticipate the RBI to commence its rate cut cycle in April, with a 25 basis point reduction,” stated a report from Ind-Ra. “This will be followed by further gradual cuts, leading to a total reduction of 75 basis points by FY26.”
The agency’s forecast is based on its assessment of various macroeconomic indicators, including inflation trends, GDP growth projections, and global economic developments. The prediction reflects a growing consensus among analysts that the RBI will begin to ease its monetary policy stance as inflationary pressures subside.
The implications of these potential rate cuts are significant. Lower repo rates can lead to reduced borrowing costs for businesses and consumers, stimulating investment and spending. This, in turn, can contribute to economic growth.
However, the RBI will also have to carefully balance the need to support growth with the imperative of maintaining price stability. The agency’s future policy decisions will depend on how these competing objectives are managed in the face of evolving economic challenges.
The market will be closely watching the RBI’s upcoming policy announcements for further clarity on the timing and magnitude of any potential rate cuts.
