Switzerland-headquartered UBS does not expect any policy rate cuts from the Reserve Bank of India (RBI) during the remaining part of this calendar year. 

This global wealth management firm continues to expect a shallow rate cut cycle of 50 basis points to commence from February 2025, Tanvee Gupta Jain, Chief India Economist at UBS, said on Monday.

“Amid India’s goldilocks phase and increased regulatory tightening by the RBI to discourage unsecured loan growth, we continue to believe that there is no urgency for the MPC to change policy settings (rates and stance) at this juncture”, Jain said at a media briefing on the ‘Post-Election Indian Economy: Mapping India’s Growth Path’.

UBS forecasts assume real rates of 1.5 per cent building in potential growth of 6.5-7 per cent for the economy. “We believe the room for rate cuts in India will be limited unless growth and/or inflation surprises on the downside”, she said.


In the upcoming Budget, UBS expects central government to remain on the fiscal consolidation path, targeting fiscal deficit at 5.1 percent of GDP in FY’24-25 and bring it further down to below 4.5 percent of GDP by FY25-26.

“Our base case is for the government to stick to a medium-term fiscal consolidation roadmap but with a populist bias. 

The higher-than-expected RBI dividend transfer to the government (additional 0.3 percent of GDP in FY25) would create fiscal leeway to increase populist spending to support consumption for lower income strata (cash transfers, higher rural spending, income tax rationalisation, affordable housing etc) while contributing to public capex”, she added.


With the general elections now over, UBS expects private capex activity to gain momentum in 2024-25. However it will likely get reflected in data (as an increase in percentage of GDP) only from 2025-26 onwards, Jain added.

Since the pandemic, the recovery in India’s capex cycle has been largely supported by government capex and strong demand for residential real estate which UBS expects to continue this year as well. 


UBS continues to expect FY24-25 GDP growth at 7 per cent year-on-year. “We believe India is on track to achieve 6.5-7 per cent growth in the medium term”, Jain added.

Even as India’s growth remains resilient, there is an apparent dichotomy between household consumption growth (below trend since the pandemic) and real GDP growth (holding up well). 

India is seeing a K-shaped consumption recovery with affluent/premium segment demand seemingly doing well, and demand for entry-level and mass-market goods has remained muted post the pandemic. 

This suggests that those at the lower end of the income pyramid, that were perhaps the most affected due to the pandemic, have still not seen their incomes recover to the level to regain their ability to spend, Jain said. 

Limited fiscal support for vulnerable sections of society and weather anomalies affecting rural income have further amplified the gap, she added.

“To help broaden India’s growth, we believe India needs a broad-based recovery in capex cycle as construction is the largest generator of jobs outside of agriculture”, Jain said. 


Post election, the implementation of four labour codes could still take place as these as these are already cleared by both houses of the Parliament, Jain added. 

The government had consolidated 29 central labour laws (out of 44 existing central laws) into four labour codes.