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News18
3 hours ago
- Business
- News18
25 bps Or 50 bps? RBI To Cut Repo Rate Again On June 6; MPC Meeting This Week, Know Expectations
Last Updated: The RBI MPC will meet from June 4-6 to decide on interest rates. Economists expect a 25-bps cut in the repo rate to 5.75%, while SBI predicts a 50-bps cut. The Reserve Bank of India's Monetary Policy Committee (RBI MPC) is set to meet for three days from June 4 to June 6, amid global uncertainties, to decide on interest rates in India. According to most economists, the central bank's rate-setting panel is expected to go for a 25-basis-point cut in the repo rate to 5.75%. However, SBI in its latest report expects a 50-bps reduction. The Reserve Bank of India has reduced the repo rate by 50 basis points in the previous two monetary policy reviews to 6%. It cut 25 bps each in February and April reviews. Expecting a 25-bps cut, Madan Sabnavis, chief economist at Bank of Baroda, said, 'We do believe that given the rather benign inflation conditions and the liquidity situation which has been made very comfortable through various measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on the (June) 6th." The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters, he added. Echoing similar expectations, Aditi Nayar, chief economist at ICRA, said, 'With the vegetable index dipping further, and compressing the food inflation the headline CPI inflation eased further to a 69-month-low of 3.16 per cent in April 2025… A 25-bps rate cut appears forthcoming in the June 2025 policy, followed by easing of 25 bps each in the August and October 2025 policy reviews." The CPI inflation is expected to average 3.5 per cent in FY2026, with the prints for Q2 and Q3 sharply trailing the MPC's projections for these quarters, allowing for an additional 75 bps of rate cuts in this calendar year, she said. A basis point is equal to a 100th of a percentage point. India's CPI inflation in April 2025, the latest available data, fell to 3.16 per cent, which is the lowest since July 2019. It is well within the RBI's target level of 4% (+/- 2%). Sankar Chakraborti, MD & CEO of Acuité Ratings & Research, also expects a 25 bps interest rate cut saying that the latest nominal GDP growth data indicates that inflation is range-bound. 'The nominal GDP growth of 9.8% against a real growth of 6.5% implies a GDP deflator of around 3.3%, meaning our inflation is range-bound. This growth number, with the current background of low inflation, creates some monetary space. We continue to expect the RBI to deliver two more 25 bps rate cuts this year, in June and August," said Chakraborti. India's real GDP grew by 7.4% in the fourth quarter of FY25, compared to 8.4% in the same quarter of the previous fiscal year. In full FY25, real GDP grew 6.5%, while nominal GDP rose 9.8%. However, State Bank of India expects a 50 bps repo rate cut on Friday, June 6. In its latest report, SBI said, 'We expect a 50-basis point rate cut in June'25 policy as a large rate cut could reinvigorate a credit cycle." It also said a large rate cut could help revive the credit cycle, with the total rate cut over the easing cycle possibly going up to 100 bps. The report highlighted that the current liquidity condition in the banking system is in extended surplus mode. Due to this, liabilities are getting repriced faster in the ongoing rate-easing cycle. 'Banks have already brought down interest rates on savings accounts to a floor rate of 2.70 per cent," according to the SBI report. The report also pointed out other positive developments such as the Indian Meteorological Department's (IMD) forecast of an above-normal monsoon, strong arrival of crops, and falling crude oil prices. These factors have led SBI to revise its CPI inflation estimate for FY26 to around 3.5 per cent with a downward bias. First Published: June 02, 2025, 12:11 IST
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Business Standard
14 hours ago
- Business
- Business Standard
RBI monetary policy: 25-bp repo rate cut on the cards, shows BS poll
The Reserve Bank of India's (RBI's) six-member monetary policy committee (MPC) is expected to cut the repo rate by 25 basis points (bps) to 5.75 per cent, nine of the 10 respondents said in a Business Standard poll. State Bank of India, however, expects a 50-bp policy repo rate cut. The committee, which will meet for three days from June 4, is scheduled to announce its policy review on Friday. All 10 respondents agreed that the RBI would lower its FY26 headline inflation projection from 4 per cent forecast in the April policy review. The rate-setting panel had reduced the repo rate by 25 bps in April, following a similar cut in February, after keeping it unchanged in 11 consecutive meetings. In the last review, the MPC had shifted the policy stance to accommodative, indicating the RBI's renewed focus on supporting economic growth. India's economic growth rebound to a four-quarter high of 7.4 per cent in the January-March period of FY25, aligning with the annual growth estimate of 6.5 per cent. The final-quarter performance outpaced expectations, beating the RBI's forecast of 7.2 per cent. The respondents expect the RBI to maintain its FY26 GDP growth projection at 6.5 per cent, while factoring in the potential impact of tariffs. Bilateral trade negotiations between India and the US are ongoing, with the current pause period set to end in the first week of July. With Consumer Price Index (CPI)-based inflation expected to remain below 4 per cent for much of FY26, respondents said the MPC was likely to maintain its monetary easing stance. CPI inflation for FY26 is tracking between 3 per cent and 3.5 per cent, suggesting that real interest rates may rise to 2.5-3 per cent if the rate remains at 6 per cent, they said. 'With CPI inflation forecast to trail 4 per cent for a large part of this financial year, the MPC's monetary easing is likely to continue. A 25 bp rate reduction is expected next week, followed by two more cuts over the subsequent policy reviews, taking the rate to 5.25 per cent by the end of the cycle,' said Aditi Nayar, chief economist at Icra. India's retail inflation eased further in April, slipping to 3.16 per cent from 3.34 per cent in March, driven by a sharp decline in vegetable and pulse prices. This marked the lowest CPI inflation since July 2019, when it stood at 3.15 per cent. Food inflation also dropped significantly, hitting a 42-month low of 1.78 per cent in April, compared to 2.69 per cent in March. The decline was primarily led by an 11 per cent year-on-year fall in vegetable prices and a 5.23 per cent drop in pulses, the steepest in over six years. 'There could be some downward revision in the CPI inflation estimate from 4 per cent. Food inflation has shown broad-based deceleration across vegetables, pulses, and cereals,' said Gaura Sen Gupta, chief economist, IDFC FIRST Bank.
Time of India
3 days ago
- Business
- Time of India
On target: FY25 fiscal deficit at 4.8% of GDP
New Delhi: The central government reined in its fiscal deficit at the targeted level of 4.8% of gross domestic product (GDP) in FY25, official data released Friday showed. Although in absolute terms, the fiscal gap touched ₹15.77 lakh crore in FY25, a tad higher than the revised estimate of almost ₹15.70 lakh crore, the targeted ratio was realised due to a higher-than-expected nominal GDP, showed the data. Nominal GDP touched ₹330.68 lakh crore in FY25, against the projected ₹324.11 lakh crore. The government, too, kept a lid on revenue spending, which nearly offset a shortfall in resource mop-up and an increase in capital expenditure last fiscal. Revenue expenditure in FY25 stood at ₹36.04 lakh crore, trailing the revised estimate of ₹36.98 lakh crore. Analysts said the Centre's goal of containing its deficit at 4.4% of GDP in the current fiscal seems all the more realistic now, especially after a record ₹2.69 lakh crore dividend transfer by the central bank earlier this month. The government had in 2021 set a target to bring down its fiscal deficit to 4.5% of GDP by FY26 (from 9.2% in the Covid year of FY21). In the budget for FY26, it aimed to lower that target to 4.4%. Capital spending, which had faltered in the early part of the last fiscal due to the general election and led to a cut in its initial target, hit Rs 10.52 lakh crore, exceeding the revised estimate of ₹10.18 lakh crore. Total expenditure in FY25 eased to ₹46.56 lakh crore from the revised estimate of ₹47.16 lakh crore, primarily due to lower revenue spending. The generous RBI dividend transfer will likely provide additional leeway of ₹60,000-70,000 crore to the government for enhanced expenditures, some analysts said. It may make up for any unaccounted for rise in defence expenditure on account of Operation Sindoor, they have said. "The upward revision in the FY25 nominal GDP number also augurs well for meeting the deficit and debt-to-GDP targets for FY26," said ICRA chief economist Aditi Nayar. Total receipts touched ₹ 30.78 lakh crore in FY25, down from the revised estimate of Rs 31.47 lakh crore, thanks to lower-than-expected tax revenue. Net tax receipts eased about 2.3% from the revised estimate to ₹24.99 lakh crore, while non-tax revenue mop-up overshot the target marginally to touch ₹5.38 lakh crore. April deficit at 11.9% of FY26 target Meanwhile, the fiscal deficit in the first month of the current fiscal hit 11.9% of the full-year target, against 13% a year before, primarily on account of higher revenue as well as capital expenditure. In absolute terms, the April deficit touched ₹1.86 lakh crore, against ₹2.10 lakh crore a year before. The pace of capital spending in April shot 61% on-year to ₹ 1.60 lakh crore, while revenue expenditure dropped 5.7% to ₹3.06 lakh crore.
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Business Standard
3 days ago
- Business
- Business Standard
Govt outperforms on fiscal deficit, brings it down to 4.77% of GDP in FY25
The government has marginally improved its fiscal deficit for 2024-25 (FY25), bringing it down to 4.77 per cent over the revised estimate (RE) of 4.84 per cent, according to the data released by the Controller General of Accounts (CGA) on Friday. With the provisional estimate of gross domestic product (GDP) FY25 of ₹330.68 trillion, showing an improvement over the RE of ₹324.11 trillion, the fiscal deficit calculated as percentage of GDP has come down. 'The government's fiscal deficit marginally exceeded the RE for FY25 by ₹77 billion, albeit led by a welcome overshooting in capital expenditure amid a less palatable miss on receipts being largely offset by considerable savings of ₹90,000 crore in revenue expenditure,' said Aditi Nayar, chief economist, Icra. Capital expenditure for FY25, at ₹10.5 trillion, stood at 103.3 per cent of the RE for the year, the CGA data showed. In line with its commitment to narrow the fiscal deficit to 4.5 per cent by FY26, the government had set the fiscal deficit target for this financial year at 4.4 per cent. Experts say the upward revision in the FY25 nominal GDP number augurs well for meeting the deficit and debt for FY26. The bumper dividend of ₹2.69 trillion announced by the Reserve Bank of India (RBI) is expected to ease the fiscal situation and help bring down the fiscal deficit in FY26 even further. The Union Budget for 2025-26 has projected a dividend income of ₹2.56 trillion from the RBI and public-sector financial institutions. 'India's medium-term growth prospects appear to be robust with sound fiscal management. Emphasis on government capital expenditure appears to be leading the growth story from the policy side, with healthy supporting growth in private final consumption expenditure,' said D K Srivastava, chief policy advisor, EY India. Net tax revenue, according to the CGA data, fell short of the RE at ₹24.99 trillion -- at 97.7 per cent. Non-tax receipts, however, overshot the RE at 101.2 per cent at ₹5.8 trillion. Union Finance Minister Nirmala Sitharaman in her FY26 Budget announced a new glide path with the debt-to-GDP ratio as the fiscal anchor, moving away from the current practice of targeting fiscal deficit. The government now targets bringing down the debt-to-GDP ratio to 50 per cent by FY31 with a one percentage point deviation on either side.
The Print
3 days ago
- Business
- The Print
Centre manages to meet 4.8 pc fiscal deficit for FY25
The CGA data showed that the fiscal deficit in actual terms was Rs 15,77,270 crore, or 100.5 per cent, of the RE. In the revised estimates (RE) presented to Parliament in February, the government had pegged the fiscal deficit or gap between expenditure and revenue at Rs 15,69,527 crore or 4.8 per cent of the gross domestic product (GDP). New Delhi, May 30 (PTI) The central government managed to meet the fiscal deficit target of 4.8 per cent of the GDP for 2024-25, according to the provisional data released by the Controller General of Accounts on Friday. The economic growth in nominal terms for the fiscal 2024-25 is estimated at Rs 3,30,68,145 crore, according to the GDP data released earlier in the day. The government received Rs 30.78 lakh crore or 97.8 per cent of RE 2024-25 of total receipts during 2024-25. This comprised Rs 24.99 lakh crore tax revenue (net to Centre), Rs 5.37 lakh crore of non-tax revenue and Rs 41,818 crore of non-debt capital receipts, the CGA data showed. Non-debt capital receipts consist of recovery of loans (Rs 24,616 crore) and miscellaneous capital receipts (Rs 17,202 crore). According to the CGA data, Rs 12,86,885 crore has been transferred to state governments as devolution of share of taxes by the government up to March 2025, which is Rs 1,57,391 crore higher than the previous year. The total expenditure incurred by the Centre is Rs 46.55 lakh crore (98.7 per cent of corresponding RE 2024-25), out of which Rs 36.03 lakh crore is on revenue account and Rs 10.52 lakh crore is on capital account. Out of the total revenue expenditure, Rs 11.16 lakh crore is on account of interest payments, and Rs 3.88 lakh crore is on account of major subsidies. Commenting on the CGA data, Icra Chief Economist Aditi Nayar said the fiscal deficit marginally exceeded the RE for FY2025, albeit led by a welcome overshooting in capital expenditure amid a less palatable miss on the receipts side being largely offset by considerable savings in revenue expenditure in the fiscal. 'The upward revision in the FY2025 nominal GDP number also augurs well for meeting the deficit and debt to GDP targets for FY2026,' she said. PTI NKD NKD BAL BAL This report is auto-generated from PTI news service. ThePrint holds no responsibility for its content.
