“I’ll be more in the 5% camp than 5.5%,” he said, adding that over the next two to three years, the RBI may have more flexibility to reduce rates.
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Seth points to two main reasons behind his view. First, he expects a global disinflationary trend to emerge from a potential US economic slowdown, especially if new tariff measures dent global demand. “The world will be actually left with some excess capacity if the US economy slows down because of the tariffs, and that will have a disinflationary impact on the rest of the world, including India,” he said in an interview with CNBC-TV18.
Second, he argues that India is undergoing a structural macroeconomic reset, marked by long-term infrastructure buildout and a lasting decline in inflation. “Countries go from developing to developed only once in the cycle, and the infrastructure build and overall structural drop in inflation only happen once,” Seth said, suggesting that India’s current economic transformation provides more policy space for rate easing.
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The broader consensus is more cautious. According to a CNBC-TV18 poll, most market participants expect the RBI to cut the repo rate by 25 basis points (bps) to 5.75% at its policy meeting on June 6, and eventually end the cycle at 5.5%. Some see the terminal rate falling as low as 5.25%, implying total cuts of 50 to 75 bps from the current level of 6%.