India’s recent macroeconomic data reinforces the case for a repo rate cut in the December monetary policy, Reserve Bank of India Governor Sanjay Malhotra said on Monday, triggering a drop in the bond yield.
“The monetary policy committee had signaled the scope of further rate cuts in October and the latest data and macro indicators reinforce the belief that there is definitely scope,” Malhotra told Zee Business in an interview on Monday. “It is up to the MPC to decide on rates in the coming policy.” India’s benchmark 10-year bond yield fell four basis points to 6.48% after the comments.
India’s retail inflation rate—measured by the consumer price index—rose 0.25% in October for the lowest print since the current CPI series began in 2012. The markets expect the RBI to opt for a repo rate cut during its monetary policy review on 5 December 2025. The central bank has lowered the benchmark rate by 100 basis points since February but held steady in October.
One basis point is one-hundredth of a percentage point.
Economists say India’s inflation will now likely undershoot the RBI’s forecast of 2.6% for the fiscal ending 31 March 2026, and come in well below the 4% target. The central bank has forecast inflation will rebound to 4% next quarter as favourable base effects fade.
According to Malhotra, the rupee’s recent weakness is a natural outcome of inflation gap with advanced economies. A 3%-3.5% annual drop is typical for the currency, he added, noting that the RBI’s focus is on containing excessive volatility rather than defending any specific level.
The rupee, which hit a new fresh low against the dollar on Friday, is Asia’s worst performer this year, having weakened about 4% versus the greenback.