The State Bank of India projects a record-low inflation level for September, proposing that the Reserve Bank of India should consider cutting interest rates at its upcoming policy meeting. The landmark decline is attributed to ongoing GST rationalization and signals a potential shift in RBI’s monetary strategy, as highlighted in DD News.
RBI Poised for Policy Shift Amid Unprecedented Inflation Drop
A fresh report from the State Bank of India hints at a significant turn in India’s monetary landscape, suggesting that the Reserve Bank of India may opt for a rate cut during its Monetary Policy Committee meet scheduled for late September. This perspective is rooted in projections that inflation will soon hit its lowest mark since 2004, bolstered by major changes in the nation’s Goods and Services Tax structure.
According to SBI’s Group Chief Economic Advisor, Dr Soumya Kanti Ghosh, consumer price inflation could dip even further by 65 to 75 basis points due to recent GST adjustments. For September and October, annual inflation is tracking below 2 percent, with October levels potentially touching just 1.1 percent — a historic low. The anticipated drop is well below the central bank’s target range, positioning RBI for a proactive stance in steering India’s economic policy.
GST Reforms: The Key Driver Behind Benign Inflation Trend
SBI’s analysis draws attention to the impact of past GST rationalisation, noting that lowering GST rates on routine consumer goods from 28 percent to 18 percent in 2019 resulted in a rapid, 35-basis point decline in inflation within a matter of months. As India continues refining its GST framework, similar moderating effects on prices are expected, providing the RBI with increased flexibility for potential rate cuts.
The forthcoming policy decision is described as a calculated one, demanding precise communication, especially since previous rate cuts were met with caution. Dr Ghosh warns against hesitancy under current benign conditions, citing that inflation could remain subdued even in the absence of further GST cuts — a view echoed in the DD News coverage.
If the RBI acts on this recommendation, it could reinforce its reputation as a responsive and forward-looking central bank. With inflation projected to remain low through FY26 and FY27, the groundwork is laid for greater monetary stimulus and economic resilience. Market watchers and policymakers await the September MPC meeting outcome, which could signal the start of a new phase in India’s policy environment
