The Reserve Bank of India’s upcoming Monetary Policy Committee (MPC) meeting has garnered significant attention, especially after a Reuters poll revealed that 90% of economists (54 out of 60) expect the central bank to cut its benchmark repo rate by 25 basis points. This expected move, which would bring the repo rate down to 6%, comes at a critical time as the economy navigates through a complex landscape of easing domestic inflation, surplus liquidity, and global uncertainties such as trade tensions.
One of the key aspects to watch in this MPC meet is the RBI’s policy stance, which is currently classified as “Neutral.” While some economists believe the time is ripe for the central bank to shift toward an “Accommodative” stance to support growth, others caution that making such a change amid an intensifying global trade war could be premature and potentially risky. The RBI’s forward guidance and tone will therefore be closely monitored for any signals of policy recalibration.
On the liquidity front, Q4 of FY25 has seen notable changes. The RBI infused ₹76,900 crore into the banking system, turning the liquidity position from a deficit to a surplus. By March 31, 2025, the liquidity stood at ₹1.2 lakh crore in surplus, compared to a deficit of ₹1.7 lakh crore during the period from December 16, 2024, to March 28, 2025. This shift in liquidity dynamics shows the central bank’s efforts to provide a supportive monetary environment.
Several factors are currently supporting the case for a rate cut. Consumer Price Index (CPI) inflation in March 2025 dropped to 5.5%, marking a 17-month low, mainly due to continued easing in food prices. In parallel, industrial output, measured by the Index of Industrial Production (IIP), grew only 3.2% year-on-year in February 2025, down from 5.0% in January and 5.6% in February 2024, indicating a slowdown in industrial activity.
The RBI will also be addressing global economic headwinds in its policy commentary. The ongoing global tariff war, for instance, is expected to impact inflation and growth in two phases — first by triggering inflationary fears, and later by potentially ushering in a deflationary environment due to weakening trade momentum. These dynamics add another layer of complexity to RBI’s decision-making process.
Inflation projections for FY25 remain unchanged at 4.80%, while FY26 inflation is expected to soften to 4.20%. Interestingly, the forecast for Q1FY26 was revised downward by 100 basis points, from 4.60% to 4.50%, reflecting optimism about continued price stability. On the growth front, the GDP estimate for FY26 has been trimmed slightly to 6.70%, compared to 6.90% projected earlier. The most significant downgrades are observed in Q1 and Q2 of FY26, where growth estimates have been revised down by 20 and 30 basis points respectively.
Overall, while macroeconomic indicators like falling inflation and surplus liquidity point toward the need for monetary easing, global uncertainties and industrial slowdown require the RBI to walk a tightrope. The upcoming MPC meet will be critical in setting the tone for the months ahead, and its decisions will likely shape market sentiment and policy direction going forward.
Disclaimer:
This article is based on publicly available data and expert commentary related to the RBI MPC poll and economic indicators. It is intended solely for informational purposes and should not be interpreted as financial or investment advice. Readers are encouraged to consult with certified financial professionals before making any financial decisions. The author and the platform bear no responsibility for any outcomes arising from the use of this information.