'Inflation Set To Remain Below Target For The Foreseeable Future, RBI Will Cut Rates By 25 Bp During MPC Meeting On December 5': HSBC

HSBC Projects RBI Rate Cut Amid Strong India Growth

HSBC Global Investment Research has forecast that the Reserve Bank of India (RBI) will cut interest rates by 25 basis points during its upcoming monetary policy committee (MPC) meeting on December 5, taking the policy repo rate to 5.25 per cent.

• Growth Momentum: The July-September quarter GDP growth came in at 8.2 per cent YoY, higher than 7.8 per cent in the previous quarter and higher than the above-consensus forecast of 7.5 per cent.
• Key Drivers: The strength in India's growth momentum is attributed to the front loading of government spending and GST-cut led retail spending.
• Softening Growth: However, the November Flash manufacturing PMI (56.6) indicated that the GST-led boost may have peaked, with overall new orders coming in soft.
• Monetary Policy: Despite the strong growth, HSBC expects the RBI to ease policy rates due to the fiscal impulse becoming contractionary and exports slowing in the March 2026 quarter.

Some key points that support HSBC's growth forecast include:

• GST rate cuts implemented in September had a positive impact on consumer demand, with production picking up in anticipation.
• Lower income states are starting to rise, even growing faster than higher income states, contributing to the national GDP growth.
• India's growth has held up decently despite the 50 per cent reciprocal tariff on India's exports by the US since August.

HSBC's projection is based on the RBI's upcoming monetary policy committee meeting on December 5, where the policy repo rate is expected to be cut by 25 basis points to 5.25 per cent.