CRSIL Ratings expects two policy cuts from the Reserve Bank of India during this fiscal starting October even as it sees the GDP growth moderating to 6.8%.
“Amid strong economic growth momentum, the MPC aims to see a durable reduction in inflation to 4% for easing monetary policy. It will monitor monsoon in the next two months, which is critical for easing food and overall inflation. Other extreme weather events and geopolitical shocks will also be monitored,” the rating agency said.
The MPC kept policy rates unchanged in its June meeting, while maintaining its stance of withdrawal of accommodation.
Growth projections
On growth, CRISIL said, “We expect real GDP growth to moderate to 6.8% in fiscal 2025 from 8.2% in the previous fiscal. High interest rates and lower fiscal impulse (from reduction in fiscal deficit) will temper growth. That said, the forecast for an above-normal monsoon brings hope for the rural economy, which was a laggard in India’s growth story last fiscal, the rating agency said.
Real GDP growth moderated to 7.8% on-year in the fourth quarter of fiscal 2024 from 8.6% in the previous quarter CPI inflation “We expect CPI-linked inflation to soften to 4.5% in fiscal 2025 from 5.4% in the previous fiscal. Assuming a normal monsoon, we expect food inflation to soften. Non-food inflation could see a statistical uptick but is overall expected to remain soft on the back of benign commodity prices,” it said.
CPI inflation eased marginally to 4.75% in May from 4.83% in the previous month.
Fiscal health
The Union Budget targets a reduction in the Centre’s fiscal deficit to 5.1% of GDP in fiscal 2025 from 5.6% last fiscal.
In the first two months of this fiscal, the Centre’s fiscal deficit stood at 3% of the budget target, compared with 11.8% during the same period last fiscal, it said.
Gross market borrowing is estimated at Rs 14.1 lakh crore for fiscal 2025, 8.4% lower on-year. The government plans to borrow 53.1% of the budgeted amount in the first half of the fiscal.
