Citibank Projects Three More Repo Rate Cuts In 2025 From RBI; Here's What It Mean

The Reserve Bank of India recently reduced the repo rate by 25 basis points to 6.25 per cent in February, marking its first rate cut in nearly five years

India’s economy is projected to grow at 6.7 per cent in the current financial year, according to estimates from the central bank released in February

Source : PTI

Citibank economists predict that the Reserve Bank of India (RBI) is likely to cut interest rates three more times this year, for a cut of 75 basis points, as the country’s economic growth outlook dims due to US-imposed import tariffs announced on Thursday.

This forecast aligns with projections from JPMorgan and Nomura, suggesting a cumulative rate cut of 100 basis points for 2025. The Reserve Bank of India's governor, Sanjay Malhotra recently announced the reduction in the repo rate by 25 basis points to 6.25 per cent in February, marking its first rate cut in nearly five years.

Samiran Chakraborty, Citibank’s Chief India Economist, highlighted that the 27 per cent tariff imposed by the US on Indian imports could shave off nearly 40 basis points from India’s GDP growth in 2025-26, according to a report.

"If these tariffs lead to a material global growth slowdown, then potentially that could impart a larger negative effect on India's exports. Also, we are worried that persistent uncertainty around continuously negotiated tariffs could depress private investment intentions and affect GDP growth too," Chakraborty said.

India’s Economic Growth

India’s economy is projected to grow at 6.7 per cent in the current financial year, according to estimates from the central bank released in February. Inflation is expected to average 4.2 per cent this year, providing the Reserve Bank of India (RBI) with room to ease interest rates.

The RBI’s rate-setting panel is scheduled to meet next week, with the decision expected on April 9. A Reuters poll of economists anticipates a 25 basis point rate cut at this meeting. However, Citibank has assigned a "very small probability" to the possibility of a 50 basis point cut in April.