The Reserve Bank of India (RBI) is expected to cut benchmark rates by 50-75 basis points during 2025-26 to support consumption and lower borrowing costs, credit rating Agency Crisil’s India Outlook 2025 report has said.

Lower interest rates are expected to mildly support consumption, as these gradually get transmitted on to other interest rates in the economy, thereby lowering borrowing costs, the report added.

The central bank, during its February monetary policy, had reduced the repo rate by 25 basis points, a first in almost five years to boost the economy. This was done after holding the repo rate at 6.50 per cent for 11 consecutive policies. The RBI increased the repo rate by 250 basis points from May 2022 to February 2023. Since April 2023, the repo rate has been steady at 6.5 per cent, to keep a check on inflation and to bring it within the medium-term target of 4 per cent.

On the growth front, the Crisil report said that in the next financial year, growth will be supported by easing monetary policy and government measures to boost private consumption. The budgeted 10.1 per cent increase in government capital expenditure (capex) will also be supportive.

Growth will be steady next fiscal despite overall lower fiscal impulse as the government narrows the fiscal deficit to 4.4 per cent of gross domestic product (GDP) from the revised estimate of 4.8 per cent, the report said.

The Indian economy recovered in the December quarter to grow at 6.2 per cent after sinking to a seven-quarter low of 5.6 per cent in the July-September period, as per data released on February 28.

Most of the growth pick-up in the third quarter of the current financial year came from the agriculture and services sector.

CRISIL Intelligence expects crude oil prices to average $70-75 per barrel in fiscal 2026, down from $78-83 per barrel in fiscal 2025, the report added.