Repo rate cut likely in Oct: S&P

New Delhi: S&P Global Ratings on Tuesday retained India’s growth forecast at 6.8 per cent for the current fiscal and said it expects the RBI to start cutting interest rates in its October monetary policy review.

In the economic outlook of Asia Pacific, S&P Global Ratings also retained its GDP growth forecast for the 2025-26 fiscal at 6.9 per cent and said solid growth in India will allow the Reserve Bank to focus on bringing inflation in line with its target.

“In India, GDP growth moderated in the June quarter as high interest rates temper urban demand, in line with our projection of 6.8 per cent GDP for the full fiscal year 2024-2025,” S&P said.

The Indian economy grew 8.2 per cent in the last fiscal. S&P said the Union Budget in July outlined that the government remains committed to fiscal consolidation and to keeping the focus of public expenditure on infrastructure. The Budget has earmarked a capital expenditure of Rs11.11 lakh crore in the current fiscal ending March 2025. S&P said the RBI considers food inflation a hurdle for rate cuts. It reckons that unless there is a lasting and meaningful decline in the rate at which food prices are increasing it will be tough to maintain headline inflation at 4 per cent. “Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have pencilled in two rate cuts this fiscal year (year ending March 2025),” S&P said. S&P expects inflation to average 4.5 per cent in the current fiscal. The RBI’s interest rate-setting monetary policy committee is set to meet on October 7-9. The central bank has held the benchmark interest rate steady at 6.5 per cent since February 2023 to keep inflation under check.