Economists divided as RBI faces expectations of October rate increase
A majority of economists and bankers surveyed by PTI expect India’s Reserve Bank to raise its repo rate by 0.25 percentage points at its October policy review, citing inflation and global rate movements. Some experts expect no change, while most foresee a hawkish tone and possible further increases during the 2026-27 financial year.
India’s Reserve Bank may raise its policy repo rate by 0.25 percentage points at its October monetary policy review, according to a majority of economists and bankers surveyed by PTI. The expected increase would reverse a period of rate cuts in 2025 followed by an extended pause. The repo rate currently stands at 5.25%, while the last increase was a 0.25 percentage-point rise to 6.50% in February 2023.
Economists cited growing inflation risks, higher energy and commodity prices and rate increases by global central banks. Kanika Pasricha, chief economic adviser at Union Bank of India, said stronger growth and rising inflation risks provided room for an increase. Dipti Deshpande, principal economist at Crisil, linked the additional price pressure to the re-escalation of the West Asia conflict and its effect on energy and commodities.
Most participants expected a hawkish tone at the review scheduled for 7 October, although they differed on whether the policy stance would change. Sachchidanand Shukla, group chief economist at Larsen & Toubro, expected the RBI to keep rates unchanged because there was not yet evidence of demand-driven inflation or an overheated economy. Other economists broadly anticipated at least two rate increases in the 2026-27 financial year.
India’s retail inflation reached an eight-month high of 4.82% in August, up from 4.45% in July, and remained above the RBI’s 4% target for a third consecutive month. Experts expected the central bank to raise its inflation forecast because of crude oil prices, food risks and broader price pressures. Expectations for growth were more positive.
Several economists predicted an upward revision to the RBI’s 6.7% growth forecast for 2026-27, citing stronger-than-expected activity during the first half of the financial year. Economists also expected the bank to continue managing liquidity through variable-rate reverse repos, open-market operations and foreign-exchange swaps.
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