Mumbai: The Reserve Bank of India (RBI) is likely to announce another policy rate cut before the end of 2025, according to a Goldman Sachs report, as part of a broader effort to support credit growth amid fiscal consolidation and regulatory easing. The report highlighted that recent RBI measures, including GST simplification, are expected to improve supply-side credit conditions, although the actual increase in lending will depend on overall economic demand. Analysts note that this move aims to sustain a gradual recovery in credit and maintain liquidity in the financial system.

External challenges continue to influence India’s economic outlook, with factors such as tighter US H-1B visa rules affecting the IT sector and elevated US tariffs on Indian exports potentially limiting credit demand. Despite these headwinds, India’s inflation rate based on the Consumer Price Index (CPI) dropped to an over eight-year low of 1.54 per cent in September, giving the RBI greater flexibility to lower policy rates and stimulate economic growth. Reserve Bank Governor Sanjay Malhotra also raised the GDP growth projection for 2025-26 to 6.8 per cent from 6.5 per cent, citing structural reforms and the streamlining of GST as offsetting external pressures.

Economic indicators suggest resilient activity across sectors, with robust private consumption, fixed investment, and manufacturing growth driving a 7.8 per cent GDP increase in Q1:2025-26. Growth in gross value added (GVA) reached 7.6 per cent, fueled by manufacturing revival and steady service sector expansion, while rural demand remains strong due to a good monsoon and healthy agricultural output. Urban demand is showing signs of gradual recovery, indicating that, if the RBI proceeds with further rate cuts, both supply and demand conditions could support sustained economic momentum going into the year-end.