India is likely to clock a growth rate of 7.5 per cent for the July-September quarter, while the Reserve Bank is expected to go for 50 basis points cut in interest rate in the first half of next year amid softer inflation, says a Barclays report.
According to the global financial services firm, India's macroeconomic data is largely "favorable" and inflationary pressures are expected to stay lower for a longer time.
According to official figures retail inflation stood at 5per cent in October, while the Wholesale Price Index (WPI) contracted to 3.8per cent during the month.
Factors like effective food price management, idle industrial capacity, softer commodity prices and a largely stable Indian Rupee augur well for inflation remaining "anchored" in 2016, the report said.
"A prolonged period of softer inflation is likely to offer space for more monetary easing - we forecast another 50 basis points of repo rate cuts during the first half of 2016," it said.
Reserve Bank Governor Raghuram Rajan on September 29, effected a more-than-expected interest rate cut of half aper cent to spur the economy.
"India's WPI stayed in negative territory and the trade deficit narrowed. FDI rules were eased. We expect Q3 2015 GDP to grow 7.5per cent and 50 basis points of repo rate cuts in H1 2016," Barclays said.
The April-June quarter GDP slipped to 7per cent, from 7.5per cent in the preceding quarter.
Meanwhile, RBI has also lowered its economic growth forecast for the current fiscal to 7.4per cent, from its previous projection of 7.6per cent.
The report further noted India's goods trade deficit was USD 9.8 billion in October, but the services trade surplus was "resilient", at USD 5.9 billion in September, "demonstrating strength of the country's external sector", it said.