RBI to cut rates three more times this year on tariff threat, says Citi

India's central bank will cut rates three more times this year by 75 basis points as the economy's growth outlook worsens due to import tariffs imposed by the United States, according to Citibank economists.

Citibank's latest forecast means it expects a total of 100 basis points in rate cuts for the year, in line with those predicted by JPMorgan and Nomura. The Reserve Bank of India cut the repo rate by 25 basis points to 6.25 per cent in February, its first in nearly five years.

The 27 per cent tariff imposed by the US on Indian imports could impact GDP growth in 2025-26 by close to 40 basis points, Samiran Chakraborty, Citi's chief India economist, said in a report.

 

"If these tariffs lead to a material global growth slowdown, then potentially that could impart a larger negative effect on India's exports," Chakraborty said.

"Also, we are worried that persistent uncertainty around continuously negotiated tariffs could depress private investment intentions and affect GDP growth too," he said.

India's economy is forecast to grow by 6.7 per cent in the current financial year, according to the central bank's estimate released in February. Inflation is seen averaging 4.2 per cent this year, leaving room for the RBI to cut rates.

The RBI's rate setting panel meets next week with a decision due to be announced on April 9. A Reuters poll of economists forecasts a 25 basis point cut in rates at the meeting.

Citi said it assigned "a very small probability of a 50 basis point cut in the April meeting.