Close call but RBI MPC could cut repo by 25 bps, economists say

The Reserve Bank of India’s monetary policy committee (MPC) may lower the benchmark repo rate by 25 basis points (bps) to 5.25% during its December 5 meeting, according to a majority view among economists surveyed. This potential rate adjustment is attributed to subdued inflation and anticipated moderation in GDP growth during the latter half of FY26.

Sakshi Gupta, Principal Economist at HDFC Bank, noted that while economic growth has surpassed expectations this year, persistent risks to H2 growth projections and inflation consistently below the 4% threshold could prompt monetary easing. “The convergence of these factors keeps the possibility of a 25 bps cut on the table,” she added.

Kotak Mahindra Bank’s Chief Economist Upasna Bhardwaj highlighted that despite Q2’s impressive 8.2% GDP expansion—the strongest in six quarters—underlying economic momentum appears constrained. “Nominal GDP growth remains in single digits, reflecting muted pricing power across sectors. Our analysis maintains the call for a December rate cut given favorable inflation trends,” Bhardwaj stated.

Gaurav Kapur of IndusInd Bank anticipates monetary easing while expecting no change in policy stance. “Benign inflation projections—particularly regarding food prices—along with consistently undershooting inflation targets justify rate action. However, strong GDP performance and inflation stabilization indicate the neutral stance should remain unchanged,” he explained.

CareEdge Ratings’ Chief Economist Rajani Sinha foresees moderating growth in coming quarters. “We project H2 GDP expansion around 7% as export advantages diminish and post-festival demand cools. With agricultural prospects strengthening and global disinflationary pressures persisting, conditions align for monetary accommodation,” she observed.

Divergent Views on Rate Action

Bank of Baroda’s Madan Sabnavis presented counterarguments, emphasizing forward-looking policy considerations. With Q4 FY26 and FY27 inflation likely near or above 4%, maintaining the current repo rate preserves appropriate real interest rates around 1-1.5%. Instead, liquidity management through OMOs might be more prudent,” he suggested.

Anitha Rangan of RBL Bank cited external sector challenges. “Given significant currency stabilization efforts—including substantial FX interventions—monetary easing now could undermine recent stability measures. Transmission effectiveness remains constrained amid persistent deposit growth challenges, limiting rate cuts’ economic impact,” Rangan noted.

Published on November 30, 2025