India may be nearing the end of its fiscal tightening phase, with another rate cut likely before the year ends, according to a report by Goldman Sachs. Alongside recent GST simplifications and signs of regulatory easing, these moves are expected to support a steady revival in credit demand, ANI reported quoting the firm.
“We expect an additional policy rate cut before year-end, and the recent GST simplification signals that peak fiscal consolidation is behind us. We expect this, along with domestic regulatory easing, to foster a gradual recovery in credit demand,” the report added.
Goldman Sachs noted that the Reserve Bank of India’s recent policy steps should ease supply-side credit conditions, though the scale of incremental lending will depend on broader economic demand.
The Monetary Policy Committee (MPC) of the RBI had unanimously decided to keep the policy repo rate unchanged at 5.5 per cent in its latest review.
“External headwinds continue to weigh on India’s outlook, including tighter US immigration costs for H-1B visas that affect Indian IT services, in addition to elevated US tariff (50 per cent) on Indian goods; these factors could temper credit demand alongside broader macro uncertainty,” the report added.
However, aided by a favourable monsoon and GST rate rationalisation, the central bank has revised its FY26 growth outlook upward.
The RBI’s policy statement indicated that current macroeconomic conditions have created scope for further easing, hinting at the possibility of another 25 basis points rate cut despite holding key rates steady for now.
