There will be two policy rate cuts by the RBI this fiscal: CRISIL

Food inflation could ease if the monsoon turns favourable this year, as IMD weather forecasts suggests. Weather risks and the uptick in crude oil prices will be key to growth.

New Delhi: CRISIL’s outlook on the near-term interest rate, expects two rate cuts by the Reserve Bank of India (RBI) this fiscal. The outlook of the S&P global company CRISIL estimates real GDP growth of India to moderate to 6.8 per cent in this fiscal from 7.61 per cent last fiscal.

According to the report, high interest rates and lower fiscal impulse will temper growth in this fiscal. Export recovery will be restricted because of uneven growth with key trade partners.

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But budgetary support to capex and rural incomes will support the overall economic growth. The outlook expects CPI inflation to soften to 4.5 per cent in fiscal 2025 from an estimated 5.4 per cent in the previous fiscal.

Food inflation could ease if the monsoon turns favourable this year, as IMD weather forecasts suggests. Weather risks and the uptick in crude oil prices will be key to growth.

The report says given the uneven inflation trends, the MPC is awaiting clearer signs of easing towards the 4 per cent target before cutting rates.

Risks from weather, crude prices and US interest rates are key monitor bales. In its April meeting, the MPC has kept policy rates unchanged and sticked to its stance of withdrawal of accommodation CRISIL estimates crude prices to average in between USD 83-88 per barrel range this fiscal compared with USD 83 per barrel last fiscal.

Brent crude increased to USD 90.1 per barrel on average in April, 5.4 per cent higher month-on-month and 7.1 per cent higher year-on-year.

The report says the current account deficit (CAD) may average at 1.0 per cent of GDP this fiscal. Moderation in India’s growth and resilience in exports with the forecasted uptick in global trade volume over last year will keep trade deficit for India and hence CAD will be in check.

Moderation in domestic growth and resilience in exports, given the forecasted uptick in global trade volume this year over last, will keep the trade deficit and, hence, CAD in check. CAD has narrowed down to 1.2 per cent of GDP in the third quarter of fiscal 2024 from 1.3 per cent of GDP in the previous quarter.

S&P Global expects the Fed to start cutting rates in December, later than its earlier forecast of July. At its April-May meeting, the Federal Open Market Committee (FOMC), the rate-setting panel of the Fed, kept its policy rate unchanged at 5.25-5.50 per cent for the sixth consecutive time.