Muted Growth Signals
Mumbai
The Reserve Bank of India (RBI) is likely to reduce policy rates by 25 basis points in the fourth quarter of 2025, according to a report by HSBC Global Research. The move is expected as inflation remains subdued while growth faces pressure from weaker export orders and slower government spending.
HSBC projected average inflation for the current quarter at 1.8 per cent, lower than RBI’s 2.1 per cent forecast. September’s consumer price inflation is expected to fall between 1 and 1.5 per cent. Strong cereal production, well-stocked food reserves, cheaper Chinese exports, and lower oil prices are key factors keeping inflation in check.
However, gold remains a significant driver of core inflation. With prices up 40 per cent year-on-year, gold added nearly 43 basis points to consumer inflation in August. On the other hand, GST rate cuts are expected to ease prices of personal care products, while core inflation, excluding food, fuel, housing, and gold, stood at 3.2 per cent—well below RBI’s target.
The report also noted that vegetable and fruit prices rose in August due to rain-related disruptions, even as cereal and pulse prices continued to ease. Excessive rains and flooding in north-west India, especially Punjab, remain a concern for future supplies.
On government spending, HSBC observed that capital expenditure, which grew 33 per cent year-on-year between April and July, may slow in the second half of FY26, settling closer to the budgeted growth of 10 per cent.