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A snapshot of India’s economy ahead of a monetary policy review by its central bank

A man pulls a hand-drawn cart in front of the Reserve Bank of India building in Mumbai
REUTERS/Danish Siddiqui
  • Mimansa Verma
By Mimansa Verma

Reporter based in New Delhi


Another hike in interest rates by the Reserve Bank of India (RBI) is inevitable, especially with inflation breaching multi-year highs.

India’s central bank is most likely to raise the benchmark interest rate by 40 basis points tomorrow to 4.8% in its monetary policy statement, according to a Bloomberg survey. The range of predictions lies between 25-75 basis points. This would follow the unscheduled 40-basis point hike in May.

“Given the elevated inflation trajectory, RBI will have to front-load rate hikes,” Kaushik Das, chief India economist at Deutsche Bank AG told Bloomberg.

Analysts expect the RBI to revise its inflation forecast higher to around 6.5% for the ongoing financial year from 5.7%. “As for GDP growth estimate, we see FY23 real GDP growth at 7.4% YoY, a shade higher than RBI’s 7.2% forecast,” a report by Bank of America Securities showed.

Global price pressures may have peaked, too, according to analysts.

“During 2022 so far, more than 45 central banks across advanced economies and emerging markets have raised policy interest rates and/or scaled back liquidity…many central banks hiked interest rates in back-to-back policies,” Soumya Kanti Ghosh, group chief economist at State Bank of India, said in a report.

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