New Delhi: Since inflation is set to remain well below target for the foreseeable future, HSBC Global Investment Research on Monday projected that the RBI will cut rates by 25 bp during its monetary policy committee (MPC) meeting on December 5 -- taking the policy repo rate to 5.25 per cent. Growth has been strong so far, benefitting from the front loading of government spending and GST-cut led retail spending.
However, the November Flash manufacturing PMI (56.6) indicated that GST-led boost may have peaked with the overall new orders coming in soft, said the report. “Growth is strong for now, but could soften in the March 2026 quarter as the fiscal impulse becomes contractionary and exports slow. We expect the RBI to ease policy rates in the upcoming December policy meeting,” the report mentioned.
The July-September quarter GDP growth came in at 8.2 per cent YoY, higher than 7.8 per cent in the previous quarter and higher than “our above-consensus forecast of 7.5 per cent”. While GVA growth came in at 8.1 per cent, nominal GDP grew 8.7 per cent. The GDP momentum was clearly higher than our above-consensus forecast. There are some good reasons for the strength, said the report.
One, GST rate cuts were implemented on the September 22, but the announcement was made on August 15. “We think that production picked up in anticipation of a rise in consumer demand. Two, our recent work indicates that lower income states are starting to rise, even growing faster than the higher income states,” the HSBC report mentioned. This, too, could possibly explain the strength in India's growth momentum. After all, national GDP is the sum of state Gross State Domestic Products (GSDP). According to the report, India’s growth has held up decently despite the 50 per cent reciprocal tariff on India's exports by the US since August.
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