Nomura economist says RBI could cut rates in December

Aurodeep Nandi, India Economist at Nomura, said the medium-term outlook for the Indian economy remains firm, backed by a stronger rupee, steady growth and room for monetary easing, even as global uncertainty persists.Nandi said progress on a trade deal with the United States will be key for the currency. Nomura expects the rupee to end the year near 88 per dollar, strengthen to 87.6 in the first quarter of 2026 and move toward 86.5 by the end of 2026. “There’ve been so many false starts on this that it’s more of sort of cautious optimism than anything,” Nandi said.
The final tariff rate under the deal will be critical, with a 15–20% range putting India on par with regional peers, while a higher rate would continue to weigh on exporters.
Nandi said the October trade deficit of more than $41 billion was unexpectedly high, reflecting weaker exports due to US tariffs and sticky imports, including gold. Even so, Nomura has only raised its current account deficit forecast for the fiscal year 2025-26 (FY26) slightly to 1.2% of gross domestic product (GDP). He said the trade deficit typically narrows toward the end of the fiscal year and does not expect external risks to rise sharply.Also Read | HSBC economist expects December RBI rate cut as inflation falls, warns of growth uncertainties

Nomura is projecting GDP growth of 7.6% for the July–September quarter, which Nandi said is likely at the upper end of expectations. But he cautioned that the previous quarter’s 7.8% print was inflated by low price deflators and that the same effect could amplify the upcoming figure. For 2025-26, Nomura expects 7% growth, easing to about 6.6% in the fiscal year 2026-27 (FY27). Nandi pointed to past policy easing, a potential US-India trade agreement and a stable global environment as positive drivers.On the Reserve Bank of India’s (RBI) next move, Nandi said the central bank faces a “really tough call.” Nomura expects another 50 basis points (bps) of cuts to bring the policy rate to 5%, but the timing remains uncertain.

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He said the December meeting is challenging to assess. While the RBI has said it has “policy space to ease,” he noted that strong GDP data and lower inflation could reduce the need for an immediate cut. “It’s a very confusing period for India because you’ve got the Trump tariff effect, you’ve got the GST cut effect,” he said.

Despite the mixed signals, Nandi said Nomura’s base case still points to a December cut, though it will be a “really close call.”

For the full interview, watch the accompanying video

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