The RBI’s Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% on October 7, its first hike since February 2023, and shifted its stance to calibrated tightening while raising its FY27 GDP forecast to 7.1%.
The pairing is deliberate. The RBI is raising its growth forecast from 6.7% to 7.1% at the same time as it raises its inflation forecast to 5.2%, which signals that it sees demand as strong enough to withstand a tighter policy.
The evidence it points to is in the data: credit growth of about 19%, inflation of 4.8% in August and crude near $100 a barrel, with a weaker rupee adding to import costs.
The governor’s message was about direction. Malhotra said rate cuts are off the table in the near term and that the next move can only be a hike or a pause, according to Forbes India.
For borrowers, the hike is small against the 125 basis points of cuts in 2025, but it ends the easing cycle.
It raised its FY27 GDP growth forecast to 7.1% from 6.7%.
Consumer price inflation was 4.8% in August, up from 4.5% in July, and core inflation was 4.2%, according to Forbes India.
Governor Sanjay Malhotra said rate cuts are off the table in the near term and that the next move can only be a hike or a pause, according to Forbes India.
Credit growth is running at about 19%, among the highest on record, according to the same report.
The backdrop is Brent crude near $100 a barrel, a weaker rupee and rate hikes by some other central banks, including the US Federal Reserve.
The repo rate was cut by a cumulative 125 basis points in 2025, from 6.5% to 5.25%, and was held at 5.25% for four consecutive meetings before this hike.
Reserve Bank of India building, Mumbai (file image), Wikimedia Commons, CC BY-SA 4.0