RBI Should Cut Rates by 50bps and Drop Neutral Stance: Amundi Report
The Reserve Bank of India should deliver an additional 50 basis points of rate cuts over the next year and move away from its neutral policy stance, according to French asset management giant Amundi.
Key Takeaways
- Amundi calls for 50bps RBI rate cuts within 12 months
- Economic growth expected to soften in 2026 due to US tariffs
- Inflation projected to average 4-5% in CY26
- Domestic demand remains primary growth driver
Growth Outlook and Fiscal Support
The report warns that economic growth may begin to soften in 2026 due to US tariffs that disadvantage India compared to regional players. Despite recent GDP forecast upgrades, Amundi expects some deceleration in Calendar Year 2026.
Growth should continue to be supported by domestic demand, aided by several fiscal relief measures including:
- Upcoming Goods and Services Tax (GST) changes
- Lower income taxes
- Anticipated rollout of the Eighth Pay Commission by January 2026
These steps are expected to boost household consumption, though the recovery in private investment remains “uneven and has recently been disappointing” due to elevated global uncertainty.
Investment Challenges and Inflation Outlook
The report noted that deregulation efforts could help revive the investment cycle, but external headwinds remain the biggest downside risk without stronger fiscal support.
On inflation, Amundi expects headline price pressures to average between 4-5% in CY26, supported by expectations of a favourable monsoon, soft global food and energy prices, and pass-through effects of GST changes.
Market Opportunities
The asset manager maintains a “slightly positive” outlook for Indian equities, backed by the country’s long-term growth potential. The most attractive opportunities are seen in:
- Infrastructure projects addressing real bottlenecks
- Manufacturing linked to global supply-chain shifts
- Technologies that expand financial inclusion
