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Key Points

Crisil's latest financial report indicates India's economic conditions remain stable despite some external pressures. The report suggests the Reserve Bank of India might implement another repo rate cut this fiscal year. Foreign portfolio investments have been experiencing outflows, primarily due to US tariffs and global economic uncertainties. Despite challenges, soft food inflation and potential tax relief measures could provide economic cushioning.

Key Points: Crisil Predicts RBI Rate Cut Amid Stable Financial Conditions

  • Financial Conditions Index remains stable at -0.6
  • RBI likely to reduce repo rate in upcoming meetings
  • Foreign portfolio investments continue outflow
  • US tariffs and global uncertainty impact export potential
2 min read

India's financial conditions stable, another rate cut likely this fiscal: Crisil

Crisil report reveals stable financial conditions in India, suggests potential repo rate reduction and moderate economic challenges

"We believe the Monetary Policy Committee of the RBI will cut policy rates once more this fiscal - Crisil Report"

New Delhi, Oct 10

India's financial conditions remained stable in September, unchanged from August, a report said on Friday, adding that the RBI may reduce the repo rate in its upcoming meetings.

According to Crisil's Financial Conditions Index (FCI), factors such as marginal improvement in bank credit growth and softer lending rates, a mild rise in the equity markets supported by Goods and Services Tax (GST) rationalisation, and stable crude oil prices hold the financial sentiment strong.

Although equity markets gained on average, they traded down in the second half of the month due to the imposition of tariffs on pharmaceutical drugs by the US and the potential hit to the IT sector from an unexpected hike in H-1B visa fees.

Despite the stability, the September FCI of -0.6 was lower than the average of -0.4 seen this fiscal.

According to the report, four factors put pressure on the FCI in September: Foreign portfolio investment (FPI) outflows, a weaker rupee, a moderating surplus in systemic liquidity and rising 10-year government security (G-sec) yield.

FPIs continued to move out of equities for the third month on continued concerns about the tariffs imposed by the US. Meanwhile, net inflows in the debt market moderated mildly. The FPI outflows put pressure on the rupee, which weakened to an all-time low against the dollar, the report noted.

Amid all the factors, the RBI may reduce the repo rate in its upcoming meetings.

"We believe the Monetary Policy Committee of the RBI will cut policy rates once more this fiscal, given the external pressures on growth and benign inflation," the report said.

The imposition of tariffs by the US and a slowing global growth are expected to impact India's exports in the second half of fiscal 2026. Elevated global uncertainty may also impact private investments.

However, factors such as soft food inflation, repo rate cuts and tax relief measures are expected to provide some cushion.

The report projected that inflation is expected to remain benign.

The GST rationalisation is likely to provide some downside to inflation, but the overall impact will depend on the extent of the pass-through. Additionally, the US Federal Reserve (Fed)'s rate cuts will aid monetary space.

- IANS

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Reader Comments

R
Rohit P
While rate cuts sound good, I'm concerned about the FPI outflows and rupee weakness. The US tariffs on pharma and IT sector issues need urgent government attention. Our exports can't afford more shocks.
A
Arjun K
Good to see stable crude prices and soft food inflation. These are crucial for common people's budgets. Hope the GST rationalization benefits actually reach consumers and aren't just absorbed by companies.
S
Sarah B
As someone working in the IT sector, the H-1B visa fee hike is worrying. Many companies might reduce hiring if US projects become less profitable. Hope the government has a backup plan for IT exports.
V
Vikram M
The report seems balanced - highlighting both positives and challenges. RBI's cautious approach makes sense given global uncertainties. Let's hope the predicted rate cut materializes soon! 👍
M
Michael C
While I appreciate the positive outlook, I respectfully disagree with being too optimistic. The FCI at -0.6 vs average -0.4 shows underlying weakness. We need stronger measures beyond just rate cuts to address structural issues.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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