Industry Anticipates Another Rate Cut From RBI As Growth Estimates Cross 6.5 Per Cent

With the Reserve Bank of India's next monetary policy review just weeks away, industry sentiment is leaning toward a potential rate cut, buoyed by encouraging inflation data and steady growth projections.

According to Ranjeet Mehta, Secretary General and CEO of the PHD Chamber of Commerce and Industry (PHDCCI), the current economic climate has bolstered optimism across sectors. “As far as rates are concerned, I think that RBI has definitely looked into it. They have reduced the repo rate. But we are, we are just waiting for the next RBI decision on this,” Mehta said. “And industry is hopeful that when inflation, we have seen the inflation data, which is within the zone of RBI, and we hope that there would be some kind of rate reduction in future, very soon.”

The RBI's Monetary Policy Committee is set to meet from June 4 to 6, and the industry is watching closely for signals on interest rates. Mehta confirmed that PHDCCI anticipates the country’s GDP to grow at over 6.5 per cent in the financial year ending March 2026, reported PTI. “We are looking at more than 6.5 per cent economic growth,” he added.

Survey of SMEs Reveals Positive Outlook

Mehta shared these insights during an event unveiling the 'SME Market Sentiment Index', which compiled responses from 3,000 small and medium enterprises across various manufacturing sectors. The survey findings indicate strong business activity in the January-March 2025 quarter (Q4 FY25), with even better expectations for April-June 2025 (Q1 FY26).

The SME Business Activity Index (SME-BAI) is designed to measure the direction of change in SME manufacturing performance, ranging from 0 to 100. A score above 50 signifies growth, while values below that indicate contraction. A reading of 50 reflects no change compared to the previous quarter. The latest index score stood at 57.7, marking a noticeable expansion in manufacturing output and business sentiment.

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Persistent Challenges for MSMEs

Despite the encouraging data, Mehta stressed that several critical issues still hinder MSME progress. “And there are majorly three challenges that our MSME are facing. One is affordable finance easily, whether that is available or not. Number two is the technology ... and the third challenge that we identified is the market access. Many SMEs, have made their products, but they do not have the wherewithal to market those and find customers,” he explained.

The SME sentiment index also serves as a tool to evaluate the actual impact of government initiatives aimed at supporting small businesses, boosting manufacturing, and enhancing export potential. Mehta emphasised the need for continued handholding of MSMEs to overcome these structural challenges.

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