
Economists push for 50 bps cut to boost India's economic growth
Mumbai: Some economists are batting for an outsized rate cut-of half a percentage point instead of the customary quarter-as future price pressures appear benign and credit demand remains subdued.
Economists from the
State Bank of India
and
Piramal Enterprises
are advocating a 50-basis-point (bps) reduction in the policy rates, due to be announced after the latest bi-monthly review Friday morning, even though an ET survey of a dozen bankers and economists indicates a 25 bps cut.
One basis point is a hundredth of a percentage point.
Currently, the repo rate-or signaling rate-stands at 6% after the central bank reduced it twice this year, by 25 bps each in February and April.
Proponents of a larger rate cut by the
monetary policy committee
(MPC) believe doing so would revive the credit cycle and boost
economic momentum
.
"We expect a 50-bps rate cut in the June policy as a jumbo rate cut could act as a counterbalance to uncertainty," Soumya Kanti Ghosh, group chief economic advisor, SBI, wrote in his latest research report.
Similarly, Debopam Chaudhuri, chief economist, Piramal Enterprises said: "The MPC should consider a larger-than-expected 50 bps rate cut this time...A 50-bps cut now could help make up for that lost time and deliver a stronger boost to economic growth."
India's fourth-quarter gross domestic product (GDP) expanded at a faster-than-expected rate of 7.4% in the fourth quarter, lifting full-year growth to 6.5% and helping New Delhi retain the tag of the world's fastest-growing major economy. However, demand growth has been uneven, with now-eased regulatory curbs on unsecured loans denting retail credit demand.
Cheaper Credit
"Weak external and urban demand along with high real rates are a drag on growth," said a research report by
ICICI Bank
. "An additional 50bps rate cut would ensure lower borrowing costs and is a stimulus to push growth higher."
Justifying a bigger rate cut, SBI's Ghosh said inflation is expected to stay within the mandated legal band. His report stated that inflation would stay below the target inflation of 4% in FY26 until December, but may increase thereafter.
Since February, the consumer price index (CPI) has been below 4%. In the last monetary policy, the RBI had estimated consumer inflation at 4.2% for FY26.
"Lower food prices should drive CPI inflation to 3.6% in FY26 before it inches again to 4.1% in FY27, which opens up room for pushing repo rate to 5.5% implying real rate of 1.5% over FY27 and Q4FY26," said the ICICI Bank report.
SBI's Ghosh is of the view that a 50 bps reduction in the June policy could reinvigorate a credit cycle. Bank loans climbed 12.1% in 2024-25, lower than 16.3% the year before. SBI expects credit and deposits to advance in the range of 10%-11% during FY26.
Piramal's Chaudhuri said the MPC should consider a larger-than-expected 50 basis point rate cut this time.

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Time of India
4 hours ago
- Time of India
NCMC card for seamless tap & travel on Metro 3 launched
Mumbai: The Mumbai Metro Rail Corporation Ltd (MMRC) on Monday launched the RuPay National Common Mobility Card (NCMC) for Metro Line 3 commuters. The NCMC card, introduced in partnership with the National Payments Corporation of India (NPCI) and the State Bank of India (SBI), allows passengers to "tap and travel" across Metro Line 3's operational stretch—from Aarey JVLR to Acharya Atre Chowk. The card offers a secure, cashless travel solution and aims to eliminate queues at ticket counters. The launch event was held in the presence of state CM Devendra Fadnavis and DCMs Eknath Shinde and Ajit Pawar, and other top dignitaries. MMRC managing director Ashwini Bhide said, "The integration of NCMC with Mumbai Metro Line 3 is a significant milestone in building future-ready, smart infrastructure." The NCMC card will also be interoperable across Metro Lines 1, 2A, and 7, as well as with other transport systems such as the Chalo bus service. Cards issued by these operators can also be used at Line 3 stations, ensuring a unified transit experience. Existing NCMC cardholders can begin using cards on Line 3 from June 11. New users can get the cards at any of the seven Line 3 stations or designated SBI branches. The cards will be issued for free with a mandatory initial top-up of Rs 100.
&w=3840&q=100)

Business Standard
5 hours ago
- Business Standard
Mospi mulls frequent expenditure surveys to track consumption patterns
The last base year revision for these key macro-economic indicators undertaken by MoSPI kicked in from January 2015 New Delhi Listen to This Article In a bid to better track changing consumption patterns, the Ministry of Statistics and Programme Implementation (Mospi) is considering more frequent household consumption expenditure surveys (HCES) and base-year revisions for the consumer price index (CPI), sources told Business Standard. 'Consumption patterns in the country are rapidly changing, with growing incomes and diversification in consumer products. To better capture them, it is important to conduct HCES more frequently. We are considering having HCES every three years and a revision in the CPI base year every four years. Things are still at a preliminary stage because the base revision exercise is still
&w=3840&q=100)

First Post
7 hours ago
- First Post
SBI report finds India's household debt rise not a cause for concern
The Reserve Bank of India (RBI) sees the increase in household debt as sustainable, especially given two-thirds of the portfolio is made up of prime and above-credit-quality borrowers read more What happened India's household debt has been on the rise over the past three years. However, according to a report by the State Bank of India (SBI), this increase is not a cause for concern. The Reserve Bank of India (RBI) sees the increase in household debt as sustainable, especially given two-thirds of the portfolio is made up of prime and above-credit-quality borrowers. Tell me more - SBI reports that two-thirds of household debt in India is of prime and above credit quality, indicating strong repayment capacity. STORY CONTINUES BELOW THIS AD - The increase in debt is attributed to a higher number of borrowers, not excessive borrowing by existing borrowers. - Around 25% of household loans are for asset creation (homes, vehicles). - Another 30% are for productive purposes such as agriculture, business, and education. - 45% of loans (personal, credit card, and consumer durable) are used for consumption. - India's household debt stands at 42% of GDP, lower than the 49.1% average among other emerging market economies (EMEs). - The RBI's rate-easing cycle has led to a 100-basis-point cut in the repo rate, reducing interest rates on loans linked to external benchmarks. - Approximately 80% of retail and MSME loan portfolios are now linked to the External Benchmark Lending Rate (EBLR), leading to potential savings of Rs 50,000–60,000 for households. - The rate cut cycle is expected to continue for two years, helping further reduce household borrowing costs. - Last week, the RBI reduced the repo rate by 50 basis points to 5.5% and also cut the Cash Reserve Ratio (CRR) by 100 basis points in four tranches. The context Household debt is a key indicator of financial stability, and while rising debt can be risky, the structure and quality of India's household borrowing paint a relatively healthy picture. STORY CONTINUES BELOW THIS AD