MPC meeting: RBI could cut repo rate by 25 bps in December meeting, say economists

India's Monetary Policy Decision: A Complex Scenario Ahead

The Reserve Bank of India's upcoming monetary policy decision has garnered significant attention as recent polls from Reuters and Informist reveal a clear divide among economists on the RBI's next step on interest rates.

Uncertain Outlook Ahead of Monetary Policy Committee Meeting

Strong GDP growth and low inflation have created a complex scenario for policymakers ahead of the monetary policy committee meeting on December 5.

Polls Show Clear Divide Among Economists

• A Reuters poll conducted before the release of the September quarter GDP data found that most economists expected a 25 basis point cut in the policy repo rate to 5.25 per cent at the December meeting.
• An Informist poll showed that 17 out of 20 economists surveyed anticipate a repo rate cut at the end of the three-day meeting.
• Sixteen predicted a 25 basis point reduction, while India Ratings and Research expected a cut between 25 and 50 basis points.

Economic Growth and Inflation: A Complex Scenario

India's economy grew by 8.2 per cent in the July–September quarter, well above expectations, leading some analysts to raise their full-year growth forecasts above 7 per cent.

Government and RBI Projections

• The RBI projects GDP growth of 6.8 per cent for FY26, with a slowdown to 6.4 per cent in the December quarter and 6.2 per cent in the March quarter.
• Retail inflation in India fell to a record low of 0.25 per cent in October and is expected to remain low in the coming months.

Experts Weigh In on Interest Rate Decision

Gaura Sen Gupta, chief economist at IDFC FIRST Bank, said the December RBI policy decision will be challenging due to resilient growth and very low inflation.

Barclays and ICICI Securities Primary Dealership Weigh In

• Barclays pointed out that growth has peaked and expects the second half of FY26 (October to March) to see lower growth than the first half (April to September).
• A Prasanna, chief economist at ICICI Securities Primary Dealership, said inflation has fallen more than expected and remains benign, so a 25 basis point cut is likely to align the real policy rate with the inflation outlook.

External Factors and Impact on Interest Rate Decision

External factors, including a 50 per cent US import tariff on Indian goods, have only made matters more complex.

Monetary Policy Committee Meeting on December 5

The Reserve Bank of India's monetary policy committee will meet on December 5 to decide on the next step on interest rates, with most economists expecting rates to remain unchanged.