India’s economy delivered stronger-than-expected growth in the July–September quarter of 2025, leading analysts to rethink the chances of an interest rate cut by the Reserve Bank of India (RBI). New data shows the economy grew by 8.2% in the September quarter, much higher than forecasts. This pushed many analysts to raise their growth estimate for the full financial year to above 7%.
India is now growing close to its potential rate of 6.5%–7%, which is considered the level at which the economy can expand without creating inflation. At the same time, retail inflation fell to a record low of just 0.25% in October. Economists expect inflation to remain low in the coming months, creating a comfortable environment for monetary policy decisions.
Despite the low inflation, some economists believe the RBI may not rush into cutting rates. According to Gaura Sen Gupta, Chief Economist at IDFC First Bank, the combination of strong growth and very low inflation suggests the central bank may choose to pause rate cuts for now. She believes there is limited room for easing and that the RBI should use this space only when growth risks become clearer.
Before the GDP data was released, many economists had predicted that the RBI would cut its key repo rate by 25 basis points to 5.25% on December 5. The RBI has already lowered interest rates by 100 basis points during the first half of 2025, but it has kept rates unchanged since August.
Some experts still expect a small cut. A. Prasanna, Chief Economist at ICICI Securities Primary Dealership, said inflation has fallen more than expected, making a 25 basis-point cut reasonable. He pointed out that the real policy rate—repo rate minus inflation—is currently very high and needs adjustment.
Others argue that growth may slow in the second half of the financial year, especially due to the U.S. decision to impose a 50% import tariff on Indian goods. This may hurt exports and employment in industries such as textiles and jewellery.
However, some institutions like Barclays say the strong GDP numbers make a rate cut less likely. Investors still hope for easing but now expect the RBI to move cautiously. The central bank may revise its inflation forecast downward and raise its GDP projection soon.
