RBI – The Reserve Bank of India (RBI) will announce its next bi-monthly monetary policy on October 1. Meanwhile, a research report by the State Bank of India (SBI) estimates that the Reserve Bank may cut rates by 25 basis points (0.25%). The report states that retail inflation will remain under control in the future, making this move beneficial for the economy.

RBI meeting and current situation

The Monetary Policy Committee (MPC), headed by RBI Governor Sanjay Malhotra, will meet for three days starting Monday. This meeting comes amid heightened international geopolitical tensions and the US imposing 50% tariffs on Indian exports. The final decision will be announced on October 1.

It is noteworthy that from February till now, RBI had cut the rate by 100 basis points in three phases, but instead of any change in the August meeting, a “wait and watch” policy was adopted.

Different opinions of experts

Bank of Baroda Chief Economist Madan Sabnavis says that inflation is already below the 4% target and the country’s economic growth rate is expected to remain above 6.5%. Therefore, a rate cut is not necessary right now, although further steps could be taken to keep investor sentiment positive and stabilize bond yields.

According to Aditi Nayar, Chief Economist at ICRA, the recent GST rationalization may lead to a decline in inflation in October-November, but the trend will return to an upward trend after that. Therefore, the October policy is likely to remain status quo (no change).

Dharmakirti Joshi, Chief Economist at CRISIL, said inflation is lower than expected, and core inflation is at a historic low. Changes in GST rates will also reduce inflation. Furthermore, the recent 25 basis point rate cut by the US Federal Reserve and the possibility of further cuts provide the RBI with policy flexibility. Mandar Pitale of SBM Bank India said the RBI may maintain a “status quo” for now and take further action based on the situation at its December meeting.

Relief from GST changes

The GST structure has changed to a two-tier one, effective September 22nd. Now, only 5% and 18% rates apply. This simplified structure has been implemented by merging the previous rates of 5%, 12%, 18%, and 28%. This has made 99% of everyday items cheaper and is expected to further control inflation.