New Delhi | September 30,2025 | SKY LINK TIMES
The Reserve Bank of India (RBI) is likely to keep its key policy rates unchanged in the upcoming Monetary Policy Committee (MPC) meeting, but could consider a rate cut as early as December, according to Goldman Sachs’ Chief India Economist, Santanu Sengupta.
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RBI Expected to Stay Dovish in October
Sengupta said on Tuesday that while India’s domestic economy remains robust, external risks such as global trade policies, tariffs, and visa restrictions are shaping investor sentiment. As a result, the RBI is expected to adopt a cautious and dovish stance in its October policy review, keeping lending rates steady for now.
“RBI’s stance will be impacted by uncertain trade policies and external headwinds, despite strong domestic growth,” Sengupta explained, citing multiple reports.
Possible 25 bps Cut in December
Goldman Sachs anticipates that the central bank may deliver a 25-basis-point rate cut in December, provided inflation remains under control and growth momentum sustains. This outlook has drawn significant attention from investors who are eagerly awaiting the RBI’s Wednesday policy announcement.
Sengupta noted that while domestic demand appears stable, global challenges — such as US tariffs on Indian goods and H-1B visa restrictions — could create capital outflows, making external conditions a key factor in the RBI’s decision-making.
GST Reforms to Boost Consumption
The Goldman Sachs economist also pointed to the recent Goods and Services Tax (GST) reductions, which he believes will drive a “mass consumption revival” starting in the October–December quarter.
“Consumption growth will be felt strongly in the festive season onwards,” Sengupta said, emphasizing that the GST rate cuts are expected to filter into the broader economy, giving an additional push to India’s growth trajectory.
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Limited Fiscal Space for Government Stimulus
On the fiscal front, Sengupta ruled out any significant new stimulus measures from the government. With a fiscal deficit target of 4.4% to maintain, he said the government has little room for fresh economic levers beyond GST reforms.
Despite external pressures, India’s economy remains on an upward trajectory. Analysts project GDP growth at 6.5% in FY2026, up from an earlier forecast of 6%, largely supported by GST reforms and resilient domestic demand.
Global Investors Watching Closely
For foreign institutional investors (FIIs), India’s near-term challenges remain tied to US tariffs and H-1B visa policies. Sengupta, however, downplayed the immediate impact of visa rules, calling them “muted in the near term.”
Overall, the message from Goldman Sachs is clear: India’s domestic fundamentals are strong, the RBI is expected to stay dovish for now, and a rate cut could arrive by December if conditions align.
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