India’s central bank may slash interest rates once in 2024, likely in Q4, according to economists surveyed by Reuters news agency.

With an increasing probability that several major central banks, such as the Federal Reserve, will postpone reducing interest rates, there is minimal advantage for the Reserve Bank of India (RBA) to act prematurely.

Indeed, with close to 8% growth, there is little sense of urgency the RBI should start cutting rates unless slowdown concerns emerge, say reports.

Within the Reuters poll, carried out between 17-30 May, all but one of 72 economists forecast the RBI will hold the repo rate at 6.50% at next month’s meeting, days after election results are due to be unveiled.

“Taking a leaf out of the global monetary policy playbook, the RBI too is likely to err on the side of caution and adopt a significantly restrained approach to rate cuts,” stated Aditi Gupta, an economist at Bank of Baroda.

“Given how the domestic growth and inflation dynamics have been placed, we do not foresee a possibility of the RBI preceding the Fed.”

In addition, almost half of the economists polled expected the central bank’s first repo rate cut would happen in Q4 this year, with an average forecast of 6.25%. 

Whereas by the end of this year, 33 of 71 economists forecast rates would be 25 basis points lower at 6.25%; 15 said 6.00%; whilst five predicted 5.75% or lower. The remaining 18 expect no rate change in 2024. 

These forecasts come despite the widespread expectation that inflation will remain above 4%, which is the midpoint of the RBI's preferred 2%-6% range, for this year and 2025.

Furthermore, inflation, which was at 4.83% in April, is expected to decrease to 4.00% next quarter before increasing in the following quarters, according to the poll. It is projected to average 4.5% for this fiscal year and the next.

Economic growth is expected to average at 6.8% this fiscal year and 6.6% in the next.