MUMBAI: The market expects a rate cut on Tuesday. The Reserve Bank of India may lower interest rates for the third time this calendar year to spur growth, according to all the respondents in an ET poll. RBI Governor Raghuram Rajan may reduce the benchmark rate by 25 basis points at the June 2 monetary policy review, said the 13 market participants surveyed. A basis point is 0.01%. The benchmark repo rate is now at 7.50%. Apart from industry, key members of the Narendra Modi government have been pushing for a rate cut. They include Finance Minister Arun Jaitley, Chief Economic Advisor Arvind Subramanian and Minister of State for Finance Jayant Sinha. With the economy clocking 7.50% growth between January and March, the central bank is likely to warn about probable challenges that could thwart a soft-inflation regime. A deficient or irregular monsoon during the crucial June-September period could well undermine agricultural prospects, adding to food inflation. Message to banks to follow suit Moreover, rising crude oil prices will help push up input costs for domestic manufacturers. “RBI is likely to maintain its accommodative stance,” said Saugata Bhattacharya, chief economist of Axis Bank. It “will calibrate its rate cuts based on the conditions in its April policy guidance: Government policy reforms to ease supply constraints, food prices and the monsoon and normalisation of US monetary policy. To these might be added domestic investment conditions, so that demand does not run ahead of capacity, reigniting inflationary pressures.” Soumya Ghosh, chief economic advisor, State Bank of India, said, “A cut in repo looks the best bet under the current circumstances.” Retail inflation eased to 4.86% in April, the lowest in four months, well below the RBI projection of 5.8% by March 2016. The wholesale inflation rate fell to a new low of (-) 2.65%, the sixth successive month of deflating prices. The RBI cut the benchmark rate by 25 basis points each on January 15 and March 4. But banks mostly refrained from passing on the benefits to consumers, prompting the governor to express his displeasure. Large banks including State Bank of India, HDFC Bank, ICICI Bank and Axis Bank reduced rates after that. “This now makes a strong case for a rate cut in the June policy,” said Ashutosh Khajuria, head of treasury, Federal Bank. A further reduction in the benchmark rate may help persuade those banks that haven’t already done so to lower rates, thus helping to revive sluggish credit demand. The latest gross domestic product numbers showed that India has outpaced China’s growth. However, some have cast doubt on the new calculation method, saying that it doesn’t reflect what’s happening on the ground. Exports have been slowing in the past three years, for instance. Markets are also looking at Rajan’s statement on the impact of an expected US rate hike as a cut in domestic rate could make securities less attractive to overseas investors.