The Reserve Bank of India (RBI) is likely to lower the repo rate by 25 basis points (bps) in its upcoming April policy meeting, as projected by India Ratings and Research (Ind-Ra). This adjustment is expected to be part of a broader reduction totaling 75 bps during FY26. According to Ind-Ra, headline inflation for FY25 is estimated to decline to 4.7%. However, if US retaliatory tariffs have a greater-than-expected impact, the RBI may introduce further monetary easing measures.
The Monetary Policy Committee (MPC) of the RBI is set to convene six times in FY26, with its initial meeting scheduled between April 7 and 9. Between May 2022 and February 2023, the repo rate saw a cumulative increase of 250 bps, peaking at 6.5%. In February 2025, the RBI made a slight cut of 25 bps, bringing the rate down to 6.25%.
Ind-Ra predicts that retail inflation in the final quarter of FY25 could dip below 4% for the first time in over five years. The agency also anticipates a maximum of three repo rate cuts in FY26, amounting to a total of 75 bps. This would bring the repo rate down to 5.5% while maintaining average inflation at around 4%, effectively setting the real repo rate at 1.5% for the fiscal year.
The minutes from the February 2025 MPC meeting indicate that the RBI is aware of the economy’s slowing growth momentum. While maintaining stable inflation remains a core priority, there is an increasing focus on leveraging monetary policy to support economic expansion.
