Indian Economists Expect the Reserve Bank to Raise Rates by Up to a Full Percentage Point as Oil Keeps Inflation Up

The Reserve Bank of India (RBI) may raise its repo rate, the rate at which it lends to banks, by 75 to 100 basis points in the current cycle, according to SBI Capital Markets. The firm expects gradual increases but says a larger move in December cannot be ruled out.

The cycle has already begun. At its October meeting, the Monetary Policy Committee chaired by Governor Sanjay Malhotra voted unanimously to raise the repo rate to 5.50% from 5.25%, having last raised rates in February 2023. It changed its stance to "calibrated tightening." Reports of the decision cited crude prices persistently above $100 a barrel, pressure on the rupee, and retail inflation of 4.82% in August. The central bank raised its inflation forecast for the 2026-27 fiscal year to 5.2%.

Fiscal policy is adding costs at the same time. The Global Trade Research Initiative (GTRI), a New Delhi think tank, urged the government to withdraw a proposed 0.4% fee on Unified Payments Interface (UPI) merchant transactions above ₹2,000. GTRI warned that the fee would raise prices, squeeze small businesses and weaken demand.

Other large oil importers face the same problem. Indonesia's state news agency Antara reports that protecting household purchasing power is a top government priority as 2026 ends. Jakarta is relying on subsidies and fiscal support rather than tighter monetary policy.