RBI Signals Potential Repo Rate Cut Amid Favorable Economic Indicators
The Reserve Bank of India (RBI) Governor, Sanjay Malhotra, has indicated a "scope for a repo rate cut" in the upcoming December monetary policy review, citing favorable macroeconomic indicators. This sentiment is echoed by global financial services firm Morgan Stanley, which anticipates a 25 basis points reduction in the repo rate at the December meeting. The RBI's focus on growth comes as inflation has reportedly declined, providing the central bank with room to maneuver.
Indian Economy Maintains Momentum and Resilience
According to the RBI's November Bulletin, the Indian economy experienced a significant pickup in momentum during October, driven by strong manufacturing and services activities, robust festive demand, and the positive impact of Goods and Services Tax (GST) reforms. The bulletin noted that inflation has moderated to historic lows, remaining well below the target rate. Furthermore, the Indian economy is showing increased resilience to external shocks, supported by strong services exports, steady remittance inflows, and stable oil prices. The RBI also cautioned about overheated global equity markets and their potential implications for financial stability.
GDP Growth Projections and Government Reforms
India's economy is estimated to have grown by 7.3% in the July-September quarter, a slight moderation from the previous quarter's 7.8%. S&P Global Ratings projects India's GDP to grow by 6.5% in FY26 and 6.7% in FY27, primarily fueled by domestic consumption. To bolster economic growth, the government is actively pursuing several key legislative changes. These include amendments to the Insurance Laws to raise Foreign Direct Investment (FDI) limits to 100%, reforms to the Insolvency and Bankruptcy Code, and the Atomic Energy Bill, which aims to open the nuclear energy sector to private investment. Additionally, recent tax reforms, such as increasing the income-tax rebate ceiling, and GST rationalization are expected to boost consumer spending. Labour reforms are also being highlighted as crucial for a future-ready economy.
Stock Market Anticipates Cautious Opening
The Indian stock market, including the Sensex and Nifty, is expected to open with a muted or flat start on November 25, 2025. This follows a volatile trading session on November 24, where both benchmark indices closed lower due to profit booking and ongoing concerns about interest rates and foreign fund outflows. Despite positive global cues driven by hopes of a US Federal Reserve rate cut, investors in India remain cautious ahead of the monthly derivatives expiry.
Trade Dynamics and Export Performance
The merchandise trade deficit widened to a record level in October 2025, as exports contracted and imports surged, largely due to increased purchases of gold and silver during the festive season. However, tariff exemptions on certain agricultural products announced by the United States are expected to support Indian exports. In a positive development, India's marine product exports have risen by 16%.