Archive · 6 Oct 2026
Why India Should Pause Rather Than Raise Policy Rates
MC Singhi argues that India’s central bank should wait before raising interest rates.
Consumer prices have risen above the bank’s 4% target, and some people therefore expect a rate increase.
But Singhi says other ways of measuring price changes suggest inflation across the whole economy is lower.
He also says price rises are concentrated in certain goods, rather than affecting everything.
Interest-rate changes may not quickly solve problems caused by supply disruptions or geopolitics.
Singhi says businesses are not investing as much as they could, and extra money in the financial system may make rate changes harder to pass through.
He believes a pause would protect economic growth while officials watch what happens next.
MC Singhi argues the Reserve Bank of India should keep policy rates unchanged despite consumer inflation exceeding the 4% threshold.
The author says national-accounts-based implicit inflation measures have been below the RBI threshold, and argues CPI alone should not determine policy.
Singhi says inflation pressures are concentrated in particular commodities and are not broadly spread across the economy.
The article says private corporate investment remains around 10–11% of GDP, while excess liquidity could make rate changes slow or uncertain to transmit.
Singhi argues a rate increase may not address supply-driven price shocks and could risk disrupting economic growth.
- Who
- MC Singhi, a former civil servant, makes the case for pausing policy rates.
- What
- He argues that the Reserve Bank of India should hold rates rather than raise them.
- When
- Ahead of the Monetary Policy Committee meeting discussed in the article; no meeting date is specified.
- Where
- India.
- Why
- Singhi says inflation pressures are concentrated in particular commodities, broader inflation measures are below the RBI threshold, investment is weak, and rate transmission is uncertain amid excess liquidity.
Pause policy rates
Raise policy rates
Inflation and monetary policy
Pause policy rates
Singhi argues CPI inflation is not a sufficient basis for a rate increase: other implicit inflation measures are below the RBI threshold, and price pressures are concentrated in certain commodities.
Raise policy rates
The article says the expected case for a rate increase includes CPI inflation above 4%, sustained GDP growth, fuel and input price pressures, and rate increases by central banks in the United States and Japan.
Growth and rate transmission
Pause policy rates
Singhi says weak corporate investment and excess liquidity make the effects of a rate increase uncertain and could threaten growth momentum.
Raise policy rates
The article reports a majority view in favour of tightening monetary policy, given the promising GDP growth scenario and price-stability concerns.
- Inflation threshold
- The RBI is mandated to maintain consumer-price inflation at 4%, according to the article.
- Private consumption comparison
- The article says NSSO estimates of private consumption were about 50% of National Accounts Statistics consumption in 2022–23.
- PFCE implicit inflation
- The article gives rates of 3.75% for 2023–24, 3.72% for 2024–25 and 1.18% for 2025–26.
- Fixed capital formation implicit inflation
- The article gives rates of 1.98% for 2023–24, 2.30% for 2024–25 and 1.54% for 2025–26.
- GVA implicit inflation
- Aggregate GVA deflators were 3.28% in 2023–24 and 2.20% in 2024–25, according to the article.
- Corporate investment
- Private corporate investment is described as around 10–11% of GDP in recent years.
- Inflation Generalisation Index
- The article says India’s index is below its threshold of 100 and describes price pressures as localised.