Cumulative RBI rate cuts could be more than 100 bps, GDP growth at 6.3%: SBI Research

The Reserve Bank of India (RBI) may cut policy rates by more than 100 basis points in the coming months, according to SBI Research, as the retail inflation hit a 67-month low in March 2025.

The report noted that Consumer Price Index (CPI) inflation eased to 3.34% in March due to a sharp drop in food prices, which saw deflation deepen to -7.04%.

Food and beverages inflation moderated to 2.88%, down 95 basis points from the previous month.

The bank expects rate cuts of 50 basis points each in June and August, driven by the increasingly benign inflation environment.

“We believe the cumulative rate cuts could now be more than 100 basis points, with an increasingly uncertain growth environment,” the report said.

SBI Research has projected GDP growth for FY26 at 6.3%, albeit with a downward bias, amid global uncertainties and domestic headwinds.

Core inflation, excluding food and fuel, rose to 4.1% in February and March 2025, its highest in 15 months, primarily due to a surge in gold prices amid global volatility.

However, excluding gold, core inflation stood at a modest 3.2%.

The report highlighted the reversal in fuel and light inflation, which moved into positive territory after 18 months, standing at 1.48% in March 2025. Meanwhile, fruit prices remained elevated, inching up to 16.27%.

The average CPI inflation for FY25 is pegged at 4.63%, down from 5.36% in FY24 and 6.66% in FY23.

“We, thus, expect average CPI inflation for FY26 in the range of 3.9%,” it said.

The report also pointed to the importance of a favourable monsoon in 2025 after the India Meteorological Department predicted rainfall within the “normal” range.

A good monsoon is critical for agriculture, which supports over 42% of the population and contributes 18.2% to GDP.