RBI Monetary Policy: Goldman Sachs Chief India Economist Expects Repo Rate Cut Only In December

The market is keenly awaiting Wednesday’s Reserve Bank of India monetary policy committee meet outcome with some hopeful of a lending rate cut. However, Goldman Sachs' Chief India Economist, Santanu Sengupta, expects India's central bank to keep rates unchanged this time around and take a dovish stance.

Sengupta adds that the RBI’s stance will be impacted by the uncertain trade policy and external headwinds, despite a strong domestic growth outlook. However, he expects the RBI to issue a 25-basis-point rate cut in December, provided growth and inflation readings support it.

“Expect RBI to cut rates in the December meet,” he said. Domestic growth numbers are looking stable, but external headwinds remain, including H1-B restrictions as well as Trump tariffs.

“If you are an FII investor looking at India, then you have tariffs and H1B, leading to outflows. That is the real headwind India is facing," he added.

Sengupta downplayed near-term concerns around U.S. visa restrictions. “H1B impact is muted in the near term,” he said, even as markets have reacted sharply to recent announcements from Washington.

Santanu Sengupta added that the domestic economy looks resilient despite the external headwinds.

“The state of the domestic economy looks quite okay. You had the GST reforms, which will feed into growth," he said.

When asked about if there will be room for one more economic lever being enforced by the government, other than the GST rate cuts, Sengupta said, "Don't see much room for the government. Expects the centre to maintain the fiscal deficit target of 4.4%."

Talking about the impact of GST cuts, Sengupta added that the move will lead to a consumption boom, starting from the October-December quarter.

“Believe mass consumption revival is on the way. Consumption growth will be felt in the October–December quarter," he said.

This comes on the back of Hindustan Unilever Ltd.'s recent statement, where the company hinted at a weak September quarter, adding that the weakness might drag until November.