RBI MPC Meet: Goldman Sachs Economist Predicts Consecutive Repo Rate Cuts In June, August To 5.5%
Due to the US tariffs, GDP growth in FY26 could be 30 basis points lower in FY26 compared to FY25, according to Goldman Sachs’ Chief India Economist, Santanu Sengupta.

As the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meets this week to decide the repo rate, Goldman Sachs expects a rate cut of 25 basis points at the meeting. Further, it expects another cut in the key lending rate in August.
“We think 25 basis points, not very different from consensus in the Friday meeting release when it comes out. We think there's one more cut after this one, which takes the repo rate to 550 (basis points). We think it will be back-to-back cuts in the June and August meetings,” Santanu Sengupta, Chief India Economist, Goldman Sachs, said during a conversation with NDTV Profit on Wednesday.
Explaining the anticipated consecutive repo rate cuts in June and August, the economist said that the rationale lies in the forward-looking inflation outlook.
“As the central bank sees inflation rising largely because of base effects into the first half of the next year, we think that they will stay away from cutting deeper," he explained.
However, Sengupta clarified that there may not be any further rate cuts after August.
He projects inflation to hover between 4% and 4.5% in Q4 FY26 and Q1 FY27. It makes further easing by the RBI unlikely, especially when economic growth remains robust.
Regarding the potential for lower oil prices to ease inflation, Sengupta noted that authorities could either pass savings to consumers via fuel price cuts or redirect them to non-consumer spending.
Even with price reductions at the pump, he expects inflation to remain around 4% to 4.5% in the first half of FY26, given low base effects and persistent core inflation pressures.
He argued that the RBI's decisive actions on liquidity, including Open Market Operations (OMOs) and FX swaps, combined with previous rate cuts, have effectively delivered more than 100 basis points of easing since mid-January.
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RBI’s dividend payout of around Rs 2.7 trillion to the government “is going to keep liquidity benign for the next couple of months.”
“Otherwise, we don't really think the RBI will need to do materially more right now in terms of keeping liquidity further benign. Already, the overnight rates are trading about 20-25 basis points below the repo rate,” he said.
Sengupta noted that the direct impact of tariffs imposed by US President Donald Trump would be limited, likely reducing growth by 10 to 20 basis points. However, indirect effects, such as heightened policy uncertainty affecting investment, could drag GDP growth down by around 30 basis points in FY26 compared to FY25.
“If the policy uncertainty reduces, let's say by the second half of the year…as well as India has completed the trade deal with the US. We think that then the drag can be over…which is why our FY27 number is higher at over 6.5%,” he added.
According to data from the Ministry of Statistics and Programme Implementation, India’s real GDP growth in Q4 FY25 was 7.4%, which was the fastest quarterly growth in the financial year.
Sengupta noted that the GDP number was boosted by lower subsidy payouts, which inflated net indirect taxes. He pointed to the Gross Value Added (GVA) data as a more accurate reflection of the economy's underlying strength.
“From the GVA front, which is the supply side or the production side of the economy, which is the first estimation that comes out from the from the statistical office, that's a solid number, I mean 6.8% growth is above consensus, we were pencilling in 6.7%,” he said.
He attributed the strong performance, particularly in the construction sector, to a significant increase in government capital expenditure in March.
Despite the current strength, Sengupta anticipates a slight pullback in the coming months. "Undoubtedly, some of this will be pulled back in the first half of this year. That is why for the fiscal year 26, we think that growth will be a shade lower than fiscal year 25," he added.Sengupta noted that the GDP number was boosted by lower subsidy payouts, which inflated net indirect taxes. He pointed to the Gross Value Added (GVA) data as a more accurate reflection of the economy's underlying strength.
“From the GVA front, which is the supply side or the production side of the economy, which is the first estimation that comes out from the from the statistical office, that's a solid number, I mean 6.8% growth is above consensus, we were pencilling in 6.7%,” he said.
He attributed the strong performance, particularly in the construction sector, to a significant increase in government capital expenditure in March.
Despite the current strength, Sengupta anticipates a slight pullback in the coming months. "Undoubtedly, some of this will be pulled back in the first half of this year. That is why for the fiscal year 26, we think that growth will be a shade lower than fiscal year 25," he added.