RBI Likely To Introduce One More Rate Cut As Inflation Expectations Soften, GST Reforms & Festive Season Spending Will Drive Economic Growth

New Delhi: The Reserve Bank of India (RBI) is likely to go for one more rate cut in the coming months as inflation expectations have dropped sharply, a new report said on Tuesday. The data compiled by the Bank of Baroda said that while the RBI has so far kept the repo rate unchanged at 5.5 per cent, there is still room for further easing to support growth.

The report added that a reduction in GST rates and festive season spending will play a major role in driving India’s economic growth in the ongoing quarter. These factors are expected to give a strong push to consumption and help offset global headwinds. According to the ‘Monthly Economic Buffet’ report for September 2025, the Monetary Policy Committee (MPC) unanimously decided to maintain a neutral policy stance, keeping rates steady while monitoring the impact of tariff changes and GST rationalisation on economic activity.

The RBI has also revised India’s growth projection for FY26 upwards to 6.8 per cent from 6.5 per cent earlier -- reflecting stronger performance in the first half of the fiscal year. Inflation projections, on the other hand, have been lowered to 2.6 per cent for FY26 from 3.1 per cent previously. The report pointed out that high-frequency indicators such as air passenger traffic, port cargo movement, and rail freight have shown signs of moderation, indicating a slight slowdown in momentum.

However, diesel consumption, government spending, and bank credit growth have recorded an improvement. The recent GST rate cut and festive season are expected to provide a much-needed lift to demand in the coming months.

Bank of Baroda noted that India continues to be the fastest-growing major economy in the world, largely due to strong domestic consumption. The report estimated that the combination of GST rate cuts and festive spending could boost overall consumption by Rs 12 lakh crore to Rs 14 lakh crore, with a major share coming from wedding-related expenses.

Disclaimer: This story is from the syndicated feed. Nothing has changed except the headline.