RBI's Rate Cut: Why Economists Call It a "Goldilocks" Move Amid Global Risks

In an online interview with ANI, Sinha said the central bank had taken the right decision at the right moment. "I would say RBI repo rate cut was a very appropriate decision by the central bank because while the GDP growth number has been very good, some of it is statistical in nature," she said.

Calling the move timely because inflation had fallen sharply below the Reserve Bank of India's 2-6% target range, she said the strong GDP print seen so far was partly "statistical in nature" due to low base effects and a low deflator.

Sinha said India's growth momentum was likely to moderate slightly in the second half of the fiscal year. "We are expecting GDP growth to moderate in the second half of the year. We are not expecting a sharp moderation, but yes, from the eight per cent growth that we have seen in H1, in H2, we are expecting growth to moderate to around seven per cent," she said, noting tariff-related impacts and fading statistical boosts.

Despite this softer outlook, she does not expect further policy easing next year. "We do not expect that there would be a need for a rate cut. So we feel there won't be a need for further rate cuts next year, as we expect GDP growth of a good 7 per cent in FY27. And we are expecting inflation to inch up from these very low levels to around the average of 4 per cent for next year," she added.

Still, she noted that the RBI signalled flexibility if global conditions worsen. "RBI governor was quite dovish in this meeting, and he has kind of left the window open that if required, the central bank could go for a further rate cut," she said, citing uncertainties around US trade policy and geopolitical risks.

Bond yields are likely to ease following the rate cut, Sinha said. "We expect yields to go down. Our view was that by the end of the fiscal year, it would be 6.3 to 6.5 per cent. And given that RBI has already cut the rate by 25 basis points, we maintain that view," she said, adding that dovish guidance could push yields toward 6.3 per cent. She said the government's borrowing plan outlined in the Union Budget would also affect G-Sec yields.

On credit, she said retail loan growth -- already strong -- could rise further. "With this further 25 basis point rate cut, there would be a further increase in that credit demand," she said. Industrial credit may not shift dramatically, though she noted emerging signs of improvement in private capex and large-industry lending. "Lower interest rates would be beneficial in pickup of that too," she said.

Regarding the rupee, Sinha said the recent sharp weakening was unlikely to persist. "We are sticking to our view of rupee reaching around 87 levels by the end of the fiscal year," she said, pointing to expected dollar softness, stable reserves and a current account deficit near 1 per cent of GDP.

Sinha said limited fiscal space reinforced the need for monetary support. "There is very limited scope on the fiscal front... so it was appropriate for RBI to stimulate growth," she said.

Talking on the same topic of repo rate cut, Ashok Gulati, Former Chairman of the Commission for Agricultural Costs & Prices and an agriculture economist, said, "Good signal to keep growth moving in a high trajectory of 7 per cent plus range. Lower inflation offered this opportunity. India is in a goldilocks situation despite President Trump's tariff onslaught on India".

- ANI