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Key Points

The Crisil report indicates a positive economic outlook with potential for additional monetary easing by the RBI. Inflation is expected to remain low due to GST rate cuts and reduced crude prices. The RBI's Monetary Policy Committee anticipates CPI inflation at 2.6% this fiscal year. Experts suggest the central bank is strategically maintaining monetary policy flexibility to address potential growth challenges.

Key Points: RBI Set for One More Rate Cut Amid Low Inflation Outlook

  • - RBI expected to implement one more policy rate cut this fiscal
2 min read

Expect 1 more policy rate cut by RBI this fiscal: Report

Crisil report suggests RBI has room for rate cut with GST reductions and low crude prices keeping inflation in check

"Benign inflation prospects keep the monetary space open for additional easing - Crisil Report"

New Delhi, Oct 2

Inflation is less of a worry this fiscal, with GST rate cuts and low crude prices likely to keep prices in check, according to a Crisil report, which predicts that the initiation of the US Federal Reserve's (Fed's) rate cuts has also added space for the RBI to cut rates.

The Fed cut policy rates by 25 bps rate in September. S&P Global expects two more rate cuts of 25 bps each in the remainder of calendar year 2025 and "we expect one more rate cut by the RBI in the current fiscal," the report mentioned.

GST is likely to bring a one-off relief to inflation, depending on when producers pass through the cuts to consumer prices. GST has been cut for a wide range of food and non-food items, likely leading to a broad-based easing of inflation.

Food inflation could face risks from excess rains in major kharif crop producing states, and its impact is yet to be ascertained. Despite this, adequate reservoir levels bode well for rabi production.

Overall, the RBI MPC expects CPI inflation at 2.6 per cent for this fiscal, compared with 3.1 per cent projected in August.

Low crude prices will further keep inflation in check. We expect Brent crude to average $62-67 per barrel this fiscal compared with average $78.8 per barrel in fiscal 2025, said the report.

"The MPC's announcement has been contrary to our expectations of a rate cut this time. While the MPC seemed satisfied with growth so far, it may be saving its monetary policy space to act when the downside risks to growth play out. Benign inflation prospects keep the monetary space open for additional easing," the report noted.

While GST cuts will increase household purchasing power, the actual impact it will depend on when producers pass through tax cuts to consumers.

"Overall, we expect the impact of GST rate cuts on consumption to play out over this fiscal and the next," the report mentioned.

- IANS

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Reader Comments

R
Rohit P
Lower rates should boost business investment. As a small business owner, this could help with expansion plans. But will GST cuts really reach consumers? Often companies don't pass on the full benefit.
A
Ananya R
Food inflation worries me more than policy rates. With excess rains affecting kharif crops, we might see vegetable prices shooting up again. RBI should focus on that aspect too. 🌾
V
Vikram M
Good to see RBI being cautious. Better to have some policy space for future uncertainties rather than cutting rates aggressively now. Smart move by MPC! 💡
S
Sarah B
As someone tracking Indian economy from abroad, this seems like balanced policy making. Low crude prices and GST cuts creating room for growth-friendly measures. Well done RBI!
K
Karthik V
Hope the rate cut happens soon. My car loan EMIs are killing me! Also, government should ensure GST cuts are actually passed to consumers. Monitoring needed 👀

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