The Reserve Bank of India is gearing up for a crucial monetary policy announcement next week, with strong expectations pointing toward a rate cut that could provide fresh stimulus to the economy. The Monetary Policy Committee led by Governor Sanjay Malhotra will convene from December 3 to 5, with the final decision on interest rates scheduled for announcement on December 5.
Economic Conditions Favor Monetary Easing
Multiple economic indicators have created what experts describe as an ideal environment for the central bank to reduce borrowing costs. Consumer inflation plummeted to a record low of 0.25% in October, driven primarily by a sharp decline in food prices and recent GST rate reductions. This substantial cooling of price pressures gives the RBI significant room to maneuver.
Sujan Hajra, Chief Economist and Executive Director at Anand Rathi Group, emphasized the favorable conditions: "We expect the RBI to announce a 25-basis-point rate cut, supported by benign headline inflation. Food prices are likely to remain in deflation, keeping overall inflation comfortably below target through the end of the fiscal year."
Growth Considerations and External Pressures
Despite India's projected growth rate of 7% in FY26, economists note this remains below the economy's estimated potential. The need to stimulate consumption and investment has become increasingly apparent, making a rate cut more compelling.
However, the central bank must balance domestic requirements against external challenges. The rupee recently touched a fresh low of 89.49 against the dollar, pressured by a widening goods trade deficit and continued foreign portfolio investor outflows. These factors present counterpoints to immediate monetary easing.
Hajra noted the RBI's capacity to manage these competing priorities: "Nonetheless, the RBI retains multiple tools beyond the policy rate to manage external balances and currency stability, even as it guides monetary conditions toward greater accommodation."
Market Expectations and Expert Consensus
The anticipation of monetary easing is widespread across financial markets and expert circles. A recent Reuters poll conducted between November 18-26 revealed that nearly 80% of economists (62 out of 80) forecast the RBI would lower the repo rate to 5.25% at the December policy meeting.
Mayur Modi, Co-founder and Co-CEO of Moneyboxx Finance, highlighted the broader implications: "As the RBI MPC convenes this month, all indicators point toward a favourable environment for a calibrated rate cut. Reduction in the repo rate at this stage could help ease financing costs, stimulate consumption, and strengthen investment sentiment across key sectors."
The policy decision comes alongside robust economic growth projections, with India's GDP expected to register 7.2% growth in the July-September quarter, according to a Mint poll of 15 economists. While slightly lower than the previous quarter's 7.8%, this still represents strong expansion by global standards.
The RBI's potential shift toward a more accommodative stance marks a significant development after maintaining rates steady since August, following cumulative cuts of 100 basis points earlier in the year. The December meeting could signal a new phase of growth-focused monetary policy as the economy enters a high-demand cycle.
