The economy is on course to grow by 6.5-7% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to have accelerated in August, but it should gradually fall back to the 4% target over the rest of the year. As such, the RBI is likely begin cutting interest rates in December. We think that the repo rate will fall to 5.50% (from 6.50% currently) at the end of the upcoming easing cycle. Our forecast is a bit more dovish than the consensus expectation of 6.00%.
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