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As India’s economy has shown strength with an impressive 8.2% GDP growth in the July-September quarter, the Reserve Bank of India (RBI) may put the brakes on further rate cuts in its Monetary Policy Committee (MPC) meeting on December 3-5, and instead opt for a policy pause. The change dashes earlier expectations of a modest 25-basis-point (bps) cut, reflecting a data-driven inclination towards stability rather than stimulus, according to a new report from SBI Research released on November 30, 2025.

The report emphasizes how better analysis of the Q2 growth print – coupled with the global trend of central banks moving into a “pause phase” – tilts the scales against easing. While rate cuts still outnumber increases around the world, their frequency is decreasing, and equity markets are showing signs of unbridled exuberance. In contrast, India’s NIFTY 500 has remained relatively stable. Still, SBI analysis warns of domestic challenges: The government securities (G-Sec) market is disorganized, with the spread between the overnight repo rate and 10-year G-Sec yields widening from 40-50 bps to 100-110 bps. This remains despite RBI’s overall 100 bps rate cut and cash reserve ratio (CRR) cut, hampering monetary transmission.

To maintain broad growth without cutting rates, the report advocates a “neutral arrangement” similar to “calibrated easing.” This includes a dual focus on yield targeting and liquidity management. Key recommendations include clear communication from the RBI to differentiate between temporary and permanent liquidity injections to promote market rationality and reduce volatility. Infusion of 2-2.5% of Net Domestic Total Liquidity (NDTL) through purchase auction; Inclusion of State Development Loan (SDL) in operation to normalize G-Sec spreads; and liquidity-neutral operation twist in G-Sec and SDL to anchor long-term yields and stabilize the curve.

The report says this approach will support sentiment without changing the policy framework, thereby ensuring that India’s growth story remains intact amid global uncertainties. As RBI Governor Sanjay Malhotra’s team deliberates, markets are keeping an eye on these liquidity maneuvers to narrow the easing gap.