Economists see 75–100 bps rate cuts as RBI trims FY26 GDP growth forecast to 6.5%

RBI rate cut

Economists expect 75-100 basis points (bps) of rate cuts during the current fiscal year after the Reserve Bank of India (RBI) cut the policy repo rate for the second consecutive time on April 9.

"We see scope for an additional 75-100 bps of rate cuts in the year ahead depending on the scale of global slowdown," said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.

The central bank cut the repo rate by 25 bps, changed its stance from ‘neutral’ to ‘accommodative’ and revised its GDP growth forecast for FY26 to 6.5 percent.

"The policy recognises the macroeconomic risks and the likely impact of trade wars, has clearly shown the intent to support growth (although the estimate has been revised downward) given the contained benign inflation environment," said Harsh Dugar, Executive Director, Federal Bank.

The RBI has forecast FY26 growth rates at 6.5 percent for Q1 of FY26, 6.7 percent for Q2, 6.6 percent for Q3, and 6.3 percent for Q4, with risks considered evenly balanced.

Before the tariff issue emerged, the RBI's growth projections for FY26 were 6.7 percent for Q1, 7 percent for Q2, 6.5 percent for Q3, and 6.5 percent for Q4.

The real GDP growth for FY25 was 6.2 percent in Q3, up from 5.6 percent in Q2.

Despite domestic strengths, the RBI’s Monetary Policy Report cautioned against external risks such as rising protectionist measures, geopolitical tensions, supply chain pressures, and volatile global financial conditions.

According to the report, India’s economic growth has been resilient and will remain so, driven by a revival in private consumption, the government's push on capital expenditure, and an upturn in agricultural activity.

The services sector continues to perform strongly, supported by "high-capacity utilisation and healthy balance sheets of banks and corporates", the report said.

The manufacturing sector's growth, according to the report, has been moderate partly due to seasonal factors, but services and infrastructure firms expressed confidence.

In March 2025, forecasters had projected 7.0 percent growth for Q4 FY25, with estimates for FY26 ranging between 6.5 percent and 6.7 percent.

The recent projections by the RBI follow a significant policy shift in the February 2025 MPC meeting, the first under Governor Sanjay Malhotra, who succeeded Shaktikanta Das.

On February 8, 2025, the MPC had cut the repo rate by 25 basis points to 6.25 percent from 6.5 percent, making it the first reduction in five years.

The previous meeting also showed a clear prioritisation of growth over inflation control.