RBI may go for 75 bps rate cut this fiscal, 25 bps each in April, June and October 2025: Report

Synopsis

SBI research predicts a 75 basis points rate cut in FY25 due to low inflation. Inflation is expected to be 3.9% in the fourth quarter and average 4.7% for the year. Industrial production grew to 5% in January 2025. Corporate revenue increased by 6.2% in Q3 FY25. Rising imported inflation and global uncertainties remain concerns.

SBI research ecowrap predicts 75 basis points rate cut this fiscal. Experts believe that CPI inflation will be 3.9 per cent in the fourth quarter of FY25 and will average at 4.7 per cent for the entire year.

However, looking ahead to FY26, inflation is expected to remain between 4.0 per cent and 4.2 per cent, with core inflation ranging from 4.2 per cent to 4.4 per cent.

Given this trend, analysts anticipate at least a 75-basis-point rate cut during this cycle, with back-to-back reductions expected in April and June 2025. Another round of rate cuts could follow in October 2025.

"With benign inflation this month and going forward, we expect a cumulative rate cut over the cycle could be at least 75 basis points, with successive rate cuts in next policy April and June 2025. With an intervening gap in Aug'25, the rate cuts cycle could restart from Oct'25, says the report.

India's consumer price index (CPI) inflation dropped to a seven-month low of 3.6 per cent in February 2025, mainly due to a sharp decline in food prices.

Food & Beverages inflation eased to 3.84 per cent as vegetable prices fell significantly. Notably, vegetable inflation turned negative for the first time in 20 months, led by major price drops in garlic, potatoes, and tomatoes.

Experts believe the ongoing MahaKumbh festival played a role in reducing garlic consumption, while fruit prices surged due to increased demand during fasting periods.

Despite the inflation slowdown, imported inflation is on the rise, jumping from 1.3 per cent in June 2024 to 31.1 per cent in February 2025.

This increase is driven by higher prices for precious metals, oils, and chemical products. The depreciation of the rupee could further impact inflation in the coming months.

Meanwhile, India's industrial production (IIP) posted strong growth of 5 per cent in January 2025, up from 3.2 per cent in December 2024.

The manufacturing sector led the way with a 5.5 per cent increase, while mining grew by 4.4 per cent. However, cumulative growth from April 2024 to January 2025 stood at 4.2 per cent, lower than the 6 per cent recorded in the same period last year.

The Indian corporate sector showed resilience despite economic fluctuations. Around 4,000 listed companies reported a revenue growth of 6.2 per cent in Q3 FY25, with EBITDA rising by 11 per cent and profit after tax (PAT) increasing by 12 per cent compared to the previous year. Sectors such as Capital Goods, Consumer Durables, FMCG, Healthcare, and Pharmaceuticals posted robust growth.

With lower inflation, an expected rate cut, and strong corporate performance, India's economy appears to be on a stable path. However, rising imported inflation and global economic uncertainties remain key factors to watch in the coming months.