Daijiworld Media Network - New Delhi

New Delhi, Dec 1: With inflation expected to stay comfortably below its target for an extended period, HSBC Global Investment Research has forecast a 25-basis-point rate cut by the Reserve Bank of India at its Monetary Policy Committee meeting on December 5, which would bring the policy repo rate down to 5.25 per cent.

The report notes that India’s economic expansion has remained robust, supported by accelerated government spending early in the fiscal year and a surge in consumption following GST reductions. Yet, signs of cooling are emerging: the November Flash Manufacturing PMI eased to 56.6, suggesting that the GST-driven demand uptick may have reached its peak as new orders softened.

“Growth remains solid for now, but could moderate in the March 2026 quarter as fiscal support tapers and export momentum slows. We therefore expect the RBI to deliver a rate cut in December,” HSBC stated.

India delivered an impressive 8.2 per cent year-on-year GDP growth in the July–September quarter—outpacing the previous quarter’s 7.8 per cent and exceeding HSBC’s already optimistic 7.5 per cent projection. GVA expanded 8.1 per cent, while nominal GDP climbed 8.7 per cent.

According to the report, several factors contributed to the stronger-than-expected performance. GST rate cuts, announced on August 15 and implemented on September 22, likely prompted manufacturers to ramp up production ahead of anticipated demand. In addition, new analysis indicates that lower-income states are beginning to accelerate, in some cases outpacing higher-income states—boosting overall national output, since India’s GDP aggregates state-level GSDPs.

Despite the drag from a 50 per cent reciprocal tariff imposed by the US on Indian exports since August, India’s growth has remained resilient, the report added.