Given the expected easing of inflation, the RBI has space to support growth with further 50-75 basis points (bps) rate cuts by March 2026, according to Crisil.

Continuing fiscal consolidation has further paved the way for monetary easing, said Crisil’s economic research team.

However, US tariff hikes, moderating US Federal Reserve (Fed) rate cuts, geopolitical events and weather-related risks will have a bearing on the rate-cutting cycle, they added.

The RBI’s monetary policy committee (MPC) cut policy rates by 25 bps from 6.50 per cent to 6.25 per cent in February, a first since May 2020. However, the MPC maintained its neutral stance, which gives it flexibility to remain data-dependent and respond to any global shock.

“We expect CPI inflation to soften to 4.4% in fiscal 2026 from our estimate of 4.7% in fiscal 2025. Food inflation is expected to ease further supported by a healthy rabi crop, expectations of a normal southwest monsoon next fiscal and soft global food prices.

“A high base for food inflation this fiscal will also provide some relief. Expectations of benign global commodity prices should help keep non-food inflation in the comfort zone,” Crisil’s economic research team said.

Published on March 22, 2025