RBI Eyes More Rate Cuts as Global Trade Clouds Loom, Says Chetan Ahya

India’s central bank could be on the verge of a series of interest rate cuts if the global trade slowdown gets worse, according to Chetan Ahya, Chief Asia Economist at Morgan Stanley. Ahya believes that while a 25 basis point rate cut is likely in the near term, the Reserve Bank of India (RBI) may go for up to three more rate cuts this year if export headwinds start dragging down economic growth.

 

Ahya points out that India’s growth is already feeling the pinch from weaker global demand and new tariff barriers. He estimates that if global trade tensions escalate, India’s GDP growth could take a hit of 40 to 50 basis points, with Asia as a whole at risk of losing more than 1% of its growth momentum. The main concern is that India’s exports could suffer not just from direct US tariffs, but from a broader global slowdown affecting multiple markets.

 

The RBI has already started easing policy by relaxing regulations on non-bank lenders, pumping liquidity into the system, and cutting rates. Economists agree that the central bank’s next steps will depend on how the global situation unfolds. If growth continues to slow and inflation stays under control, there’s room for the RBI to cut rates further—even below the so-called neutral rate.

 

Market watchers are now looking to the RBI’s upcoming policy meetings for clues. The consensus is that, in a world of rising uncertainty, the RBI will act decisively if growth risks mount, possibly delivering three or more rate cuts in 2025.

 

Sources: CNBC-TV18, Moneycontrol, Mint