RBI May Cut Rates By 75 Basis Points In FY25 Amid Falling Inflation: SBI Report

In its latest Ecowrap report, the State Bank of India (SBI) has projected a 75 basis point rate cut in the current fiscal year, citing easing consumer price inflation (CPI) and improving industrial and corporate performance, ANI reported.

Analysts expect back-to-back repo rate reductions in April and June 2025, followed by a potential third cut in October.

"With benign inflation this month and going forward, we expect a cumulative rate cut over the cycle could be at least 75 basis points, with successive rate cuts in next policy April and June 2025. With an intervening gap in Aug'25, the rate cuts cycle could restart from Oct'25," the report noted.

India’s CPI inflation dropped to a seven-month low of 3.6 per cent in February 2025, largely due to a sharp fall in food prices.

Food and Beverages inflation eased to 3.84 per cent, driven by significant drops in vegetable prices, including garlic, potatoes, and tomatoes.

Interestingly, garlic prices saw a decline, attributed by experts to reduced consumption during the ongoing MahaKumbh festival.

In contrast, fruit prices surged, as demand spiked during the fasting season.

Looking ahead to FY26, inflation is expected to range between 4.0 per cent and 4.2 per cent, with core inflation likely hovering around 4.2 per cent to 4.4 per cent.

However, concerns loom as imported inflation has surged from 1.3 per cent in June 2024 to 31.1 per cent in February 2025, driven by higher global prices of precious metals, oils, and chemical products, exacerbated by the depreciation of the rupee.

Meanwhile, the Index of Industrial Production (IIP) recorded a healthy 5 per cent growth in January 2025, up from 3.2 per cent in December.

Manufacturing led the momentum with a 5.5 per cent rise, while mining grew 4.4 per cent. Cumulatively, IIP growth from April 2024 to January 2025 stood at 4.2 per cent, down from 6 per cent a year earlier.

The Indian corporate sector demonstrated resilience, with 4,000 listed companies posting 6.2 per cent revenue growth in Q3 FY25. EBITDA rose 11 per cent, and profit after tax (PAT) climbed 12 per cent year-on-year.

Sectors like Capital Goods, Consumer Durables, FMCG, Healthcare, and Pharma showed notable strength.

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