印度储备银行观察：五个紧迫问题

Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it.MDDI (P) 005/01/2025 MDDI (P) 006/09/2024 MDDI (P) 004/10/2024 MDDI (P) 020/10/2024We expect the RBI to cut rates by 25bp in the upcoming6June meeting, and the conversation to gently pivot to howmany more cuts there might bein this cycleInflation islikely to trend below target in FY26, and help liftreal incomesand fiscal revenuesInflation and growth forecasts for FY27 couldultimatelyindicatethe extent of furthereasing,withforecast changeslikely sheddingsome lightQ1.How much more will the RBI cut?Following two rate cuts and large liquidity infusion, we think space for more easingremainsopen,albeitmoreviaratecutsthanliquidityinfusion (see exhibits1 and 2).After all, inflationremains well below target, and GDP growthislower than a year ago(we discussthismore in subsequent sections).We expect a 25bp rate cutatthe upcoming6Junemeeting, followed by another inAugust, taking the repo rate to 5.5%.The RBI may pause in Octobertoevaluatethetransmissionofmonetary policytolending and deposit rates. We forecast a final ratecut in December,althoughmuch will depend onthe state of growth around then.WhiletheRBI’s easing actions have been well timed, it will also be importantthat itstopsat the right time to preserve macro stability. We believe the RBI willconsiderthe following when thinkingabout the right time to pause:On the back oflowbase effects, inflation couldrise in FY27Growth trends are not pointing towards a collapse in domestic demandExternal financesaresupported bya lowcurrent accountdeficit, but capitalinflows are weakEarlyindicationsof what the RBI isthinkingabout the length of the easing cyclecould come from the policy statements on6June;for instance,byhow much the RBIcutsitsFY26 inflation forecast (currently at 4%),and how much above target FY27inflationis(currently at 4.3%).We do not expect any change in the growth forecast (currently at 6.5% and 6.7% forFY26 and FY27)atthe upcoming meeting.India RBI WatchFive burning questions ◆◆◆◆◆◆ Q2.For how long will inflation remain low?Averaging around 2.5% for the next six monthson ourforecasts, low inflation is likely to be India’sgreatest macroeconomic strength. Several factors havecome together to engineer this.One, ahighbase–CPI inflation averaged c5.5% over the last three years. Two, with a good weatheroutcome, food prices are falling across perishables (vegetables and fruit) and non-perishables(cereal and pulses). Strong cereal production, in particular, means that granaries are full(see exhibit3), and the government can even slow release stocks to control cereal inflation over a 2-year horizon.Three, core inflation remains contained, led by a stronger INR, falling commodity prices, importeddisinflation from China, and softer growththan ayear ago. And if gold prices were to fall in 2H2025(as our commodities team forecasts), core inflation could fall quickly.Low inflation will not just keep the space for monetary easing open, but also help prop growth up,and help make fiscal targets achievable. We discuss these in the sections below.One word of caution. It is worth keeping in mind that just like a high base from last year is helpinglower inflation now, a low base from the current year could push inflation up next year. For instance,if CPI inflation averages 3% in FY26, a similar sequential momentum would raise it to about 4.5%next year(see exhibit4). Also weather events can change the narrative abruptly.As such, even as inflation remains below the 4% target in FY26, it may not be a multi-year phenomenon.Ex 3: Government’s granaries are fullEx 4: Alow base from the current yearcould push inflation up next yearSource:CEIC, PIB, HSBCSource:CEIC, HSBC071421283542May-24Aug-24Nov-24Feb-25May-25Mn tonsStocks in central poolRiceWheatRice buffernorm as of April 1Wheat buffernorm as of April 12.04.06.08.0FY20FY21FY22FY23FY24FY25FY26fFY27f% y-o-yHeadlineFood and BeverageCore (excl. food, fuel & transport, housing) Trends in inflationForecast Q3.Is growth strong or weak?While GDP growth for 4Q came inat7.4%, broadly in line with our expectation, we believe theGVA print, which came in at 6.8%, better reflects the state of the economy. As we explained inour 100indicators report, growth momentum is higher than in the last few quarters, but lowerthan the same time lastyear (6.8% vs. 7.3% y-o-y, seeIndia: 100 indicators of growth: And thegift of inflation and fiscal space, 26 May 2025).Going ahead, results fromtheongoing tug of war between formal and informal sectorconsumption will determine growth rates (seeResetting India’s growth equation: Consumption,saving and investment, 29 April 2025).Informal sector consumption makes up 66% of overall consumption. It has been weak for a fewyears, and one of the reasonshas been elevated inflation. As inflation falls, real purchasingpower will likely rise.Some info