The Reserve Bank of India (RBI) has frontloaded its rate cuts to support economic growth, taking advantage of a benign inflation outlook, according to a Crisil report. The global ratings agency expects one more repo rate cut in the current fiscal (FY26), followed by a pause.
Crisil forecasts India’s GDP to grow at 6.5 per cent this fiscal, though risks remain due to US tariff hikes. It outlined several factors that could help India withstand global pressures.
Favourable Monsoon and Oil Prices to Cushion Global Impact
The report pointed to a positive outlook on rainfall and stable crude oil prices. It added that India’s strong external position — low current account deficit, low short-term debt, and ample forex reserves — will act as a buffer.
Rate cut transmission, income-tax reductions for the middle class, and low food inflation will help maintain domestic demand, Crisil stated. It added that a 100-basis point cut in the repo rate and an expected 100-bps CRR cut in the second half of FY26 will accelerate the transmission of monetary easing to broader interest rates.
Monetary Support Gains Traction Amid Neutral Policy Shift
Crisil said a sharp drop in inflation since the last policy review allowed the Monetary Policy Committee (MPC) to step up support. A healthy monsoon and low crude prices are likely to keep inflation near the RBI’s 4 per cent target this fiscal.
The RBI rate cuts are crucial in countering external headwinds and supporting consumption. Crisil observed that transmission to lending and deposit rates has begun. From February to May, deposit rates fell by 15 bps, home loan rates by 30 bps, and auto loan rates by 20 bps.
The MPC’s shift to a neutral stance signals a more data-driven approach. It also acknowledged limited policy space after the 100-bps cut already implemented. Crisil noted that surplus liquidity, especially after the expected CRR cut, will further ease interest rates.
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