Daijiworld Media Network- New Delhi

New Delhi, Apr 8: Global financial services major Goldman Sachs has forecast that the Reserve Bank of India (RBI) may announce a 25-basis point cut in the repo rate, bringing it down to 6.00 per cent during the Monetary Policy Committee (MPC) meeting scheduled for April 9. The firm further anticipates that the rate could drop to 5.50 per cent by the end of 2025.

According to Goldman Sachs, multiple factors have created conducive conditions for the central bank to ease monetary policy. The Indian economy, showing signs of moderation in Q1 as indicated by high-frequency indicators, alongside easing inflation, is paving the way for a rate cut.

The report expects March’s Consumer Price Index (CPI) inflation to come in at 3.7 per cent. Moreover, a decline in global crude oil prices and the US Dollar Index, following tariff-related announcements by the US government, has bolstered the case for easing rates.

India's banking system is currently witnessing a liquidity surplus of around Rs 1 trillion (roughly 0.5% of net demand and time liabilities), attributed to the RBI’s continued liquidity support, including Rs800 billion in Open Market Operations (OMOs) announced recently. With overnight inter-bank rates now trading below the repo rate, Goldman Sachs believes the central bank’s neutral policy stance is less critical for future liquidity guidance.

Goldman Sachs has also revised its economic outlook for India. The 2025 GDP growth forecast has been lowered by 30 basis points to 6.1 per cent, citing global headwinds such as US tariff hikes and weaker services exports.

In terms of inflation, the firm anticipates headline CPI to hover near 4 per cent in the latter half of 2025, helped by lower food inflation. While February's CPI dropped to a seven-month low of 3.6 per cent year-on-year, core inflation (excluding volatile food items) has stayed under RBI's target range for much of the past year. However, a slight uptick to around 4 per cent is expected in the coming quarters.

Additionally, as of April 3, banking system liquidity has swung to a surplus of Rs 1.7 trillion, compared to a deficit observed over the past three months. This turnaround has been driven by the RBI’s long-term liquidity injections totaling Rs 5.9 trillion since mid-January.

With inflation under control and surplus liquidity in place, the April policy meeting may well mark the beginning of a gradual rate easing cycle, as per Goldman Sachs’ projections