RBI Governor Raghuram Rajan is expected to cut 25bp in February. Inflation should peak at 5.5-6% by January 2016 to meet the RBI's under-6% target. The RBI will be on a long pause thereafter. RBI's around 5% March 2017 target will depend on the course of commodity prices and rains next year, especially given two years of successive drought. 

There is little scope for the RBI to cut the repo rate below 6.5% if it is to target consumer price index (CPI) inflation, although the market calling for rate cuts last year. Medium-term CPI inflation averages 7%, which may be used as a proxy for inflation expectations.