India’s central bank raises rates to 5.50 per cent
India’s central bank increased its policy repo rate by 25 basis points and switched from a neutral stance to calibrated tightening. All six committee members supported the rate increase, while two opposed the stance change. The bank projects inflation of 5.2 per cent and real growth of 7.1 per cent for fiscal 2026–27 amid stronger price risks. The decision followed the October 5–7 meeting.
Economics & Markets··Midday
India raises its policy rate and changes direction
India’s central bank raised its policy repo rate by 25 basis points to 5.50 per cent after the Monetary Policy Committee’s October 5–7 meeting. Governor Sanjay Malhotra announced the decision. The committee also moved from neutral policy to calibrated tightening, a stance directed at containing price pressures. All six members backed the rate increase; four supported the stance change and two preferred to remain neutral.[1], [2]
The standing deposit facility rate became 5.25 per cent, while the marginal standing facility and Bank Rate became 5.75 per cent. Nagesh Kumar and Ram Singh were the members favouring a neutral stance. The increase follows the easing cycle that began in 2025. The previous rate increase was in February 2023, when a 25-basis-point move had taken the policy rate to 6.50 per cent. Rates remained unchanged during 2023–24.[1], [2]
Price pressures broaden beyond the headline rate
Annual consumer inflation reached 4.8 per cent in August, against 4.5 per cent in July. Core inflation was 4.2 per cent, or 2.9 per cent excluding precious metals. Items with annual inflation above 4 per cent represented about 37 per cent of the weighted consumer basket. The bank projected fiscal 2026–27 inflation of 5.2 per cent and average core inflation of 4.4 per cent.[1]
The bank’s quarterly inflation forecasts were 4.9 per cent, 6.0 per cent and 5.7 per cent for the second, third and fourth quarters, followed by 5.6 per cent in the next fiscal year’s first quarter. Malhotra said renewed conflict in West Asia had worsened the inflation outlook. The committee also identified deficient monsoon rainfall and El Niño as risks to agriculture and rural demand.[1], [2]
The bank projects 7.1 per cent growth for the fiscal year
The bank headed by Sanjay Malhotra projected real gross domestic product growth of 7.1 per cent for fiscal 2026–27. Its quarterly forecasts were 7.2 per cent, 6.9 per cent and 6.8 per cent, followed by 7.1 per cent in the next fiscal year’s first quarter. The bank cited the National Statistics Office estimate of first-quarter growth at 7.8 per cent. The committee said credit growth remained strong and the spread into pricing behaviour was limited. It said subsequent decisions would depend on incoming data and risk assessments. The next meeting is scheduled for December 2–4, with October minutes due on October 21.[1]
