RBI’s Timely Rate Cut Offers Critical Support to Economy: HDFC Bank Economist Sakshi Gupta

Ahmedabad | Gujarat — In a significant move aimed at bolstering India’s economic momentum, the Reserve Bank of India (RBI) announced a much-anticipated rate cut, a step that many analysts believe will cushion emerging risks to growth. Reacting to the policy decision, Ms. Sakshi Gupta, Principal Economist at HDFC Bank Ltd, described the rate cut as both “timely and prudent,” highlighting its importance amid global uncertainties and wavering domestic consumption trends.

“The RBI delivered a rate cut in line with our expectations, recognising the impending risks to growth and utilising the monetary space yielded by low inflation,” Gupta noted, underscoring the rationale behind the central bank’s calibrated policy easing.

Despite GDP growth climbing above 8% in Q2 FY26, Gupta warned that the external environment continues to pose challenges. “The risk from external headwinds on exports continues to linger on. Moreover, the sustainability of the consumption pick-up during the festive season remains to be seen,” she said. Given these concerns, she emphasized that the rate cut would provide a “counter-cyclical push to consumption and growth,” helping balance potential slowdowns in the months ahead.

Gupta expects inflation to remain below the RBI’s 4% target until mid-year, indicating further room for policy flexibility. “Space for another rate cut remains if growth shows signs of faltering in the coming quarters,” she added. However, she also cautioned that if current economic momentum persists—particularly alongside the possibility of a favourable trade deal—this could mark the end of the rate-cutting cycle.

HDFC Bank’s projections place GDP growth at 7.3% for FY26 and 6.5% for FY27, reflecting strong but moderating economic activity. Inflation is forecast at 2% in FY26 and 4% in FY27, signalling a benign outlook that supports accommodative monetary policy.

A critical component of the RBI’s strategy has been its liquidity management. Gupta highlighted that the central bank’s durable liquidity infusions through OMO purchases and buy/sell swaps will help ensure the rate cut transmits effectively across the financial system. These measures, she noted, will also help “offset the drag from recent FX interventions and ease upward pressure in the bond market.”