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Informist, Friday, Dec. 5, 2025

 

MUMBAI – Dharmakirti Joshi, chief economist at Crisil Ltd., said the following on the Reserve Bank of India's fifth bi-monthly monetary policy statement for 2025-26 (Apr-Mar) detailed on Friday:

 

In line with our expectations, the Monetary Policy Committee of the Reserve Bank of India has cut the repo rate by 25 basis points. The accompanying liquidity-enhancing measures, including open market purchases and forex swaps, underscore the growth-supportive nature of this policy decision.

 

This fiscal, economic data has surprised on both growth and inflation fronts, creating elbow room for the rate cut. Real GDP growth has surpassed expectations, reaching 8% in the first half of this fiscal, while retail inflation has decelerated sharply. 

 

The drop in headline inflation below the lower end of the RBI's target range of 2-6% has been driven by food inflation, with fuel inflation also subdued. Core inflation, excluding gold, was 2.6% in October, aided by goods and services tax cuts, indicating absence of excess demand pressure. Excess supply-chain capacity globally, particularly in China, also suggests limited upward pressure on goods inflation.

 

The repo rate cut is expected to support growth next fiscal, as monetary policy typically has a lagged effect. Today's liquidity-enhancing measures will also help transmit the policy rate cut to broader market interest rates.

 

We forecast India's GDP growth at 7% this fiscal, following an expected slowdown to 6.1% in the second half due to higher US tariffs and normalisation of government capital expenditure. Next fiscal, we expect GDP to grow a healthy 6.7%. We project inflation to remain benign at 2.5% this fiscal but rise to 5% next fiscal largely due to a statistical low base effect.  End

 

Compiled by Anjana Therese Antony

Filed by Avishek Dutta

 

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