One More Rate Cut To Go; India's GDP Goal 6.5% This FY26 Says Global Ratings Agency

New Delhi:The Reserve Bank of India (RBI) has chosen to frontload its rate cuts, turning to support growth amid benign inflation prospects, according to a Crisil report, which expects one more repo rate cut this fiscal (FY26), and a pause after that.

The global ratings agency also expects India’s GDP at 6.5 per cent this fiscal, with risks on the downside due to US tariff hikes. Crisol listed some factors which are expected to help domestic growth hold up against global tariff risks.

“Positive outlook on rains and crude oil prices and healthy external accounts — low current account deficit and low short-term debt — with sufficient forex reserves will provide a buffer against global turbulence,” said the global financial insights major.

Rate cut transmission, income-tax cuts for the middle class and low food inflation will support demand, it added. A 100-bps cut in the repo rate so far, coupled with a 100 bps CRR cut in second half of this fiscal, will ramp up transmission of monetary easing to broader interest rates.

“A sharp fall in inflation since the previous policy review allowed the MPC to increase monetary support. A healthy monsoon, coupled with low crude prices are likely to keep inflation aligned to the RBI’s 4 per cent target this fiscal,” said the report.

The rate cuts will be pivotal in supporting domestic growth this fiscal against external headwinds. The transmission of RBI’s rate cuts to market interest rates and bank lending rates has begun. This, coupled with income-tax cuts and easing inflation will support consumption. A change in policy stance to neutral indicates a more data-dependent approach going forward. The MPC statement also mentioned limited monetary space after the 100-bps policy rate cut done so far.

“Surplus liquidity has enabled transmission of RBI’s rate cuts to market interest rates. Since the central bank’s first rate cut in February 2025, deposit rates decreased 15 bps on average till May, home loan rates 30 bps and auto loan 20 bps. The sharp increase in liquidity post the CRR cut will further facilitate easing of interest rates,” said Crisil.

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