Archive · 2 Sep 2026
RBI Panel Member Warns Persistent Inflation Could Prompt Rate Review
Saugata Bhattacharya is a member of India’s Monetary Policy Committee.
He said the committee may need to look again at interest rates if inflation stays high or spreads across more products.
The current policy repo rate is 5.25%.
He supported keeping the rate unchanged at the August meeting.
He wants to wait for more inflation and economic growth data before deciding what to do next.
Raising rates too early can make it harder for businesses and people to borrow money.
But waiting too long can allow prices and inflation expectations to rise further.
He said the economy is still growing strongly, so policymakers must carefully balance growth and inflation.
MPC member Saugata Bhattacharya said persistent or broadening inflation could require a review of the 5.25% repo rate.
He said policymakers must balance the economic cost of early tightening against the risk of falling behind the inflation curve.
Bhattacharya voted to keep the rate unchanged in August and said incoming inflation and GDP data would guide future decisions.
He cautioned that changing the neutral stance could signal a commitment to sequential rate increases, which he said was not yet warranted.
He said growth remains resilient, credit growth is above 18%, and signs of economic overheating are still relatively muted.
- Who
- Saugata Bhattacharya, an external member of India’s Monetary Policy Committee, expressed the views in a personal capacity.
- What
- Bhattacharya said the MPC may need to review the policy repo rate if inflation becomes persistent, broad-based, or increasingly entrenched.
- When
- The comments followed the August policy review and referred to the next review in October, when additional data will be available.
- Where
- The interaction took place in New Delhi.
- Why
- Policymakers are weighing the risk of persistent inflation against the economic cost of premature policy tightening.
Arguments for Reviewing Rates
Arguments for Waiting
Persistent inflation
Arguments for Reviewing Rates
If inflation becomes persistent, more diffuse across the CPI basket, or causes inflation expectations to become unanchored, the policy repo rate may need to be raised.
Arguments for Waiting
Bhattacharya said officials should first examine additional inflation readings and updated forecasts before changing rates.
Policy stance
Arguments for Reviewing Rates
A more restrictive stance could prepare policy for stronger action if price pressures widen.
Arguments for Waiting
He said changing the neutral stance could imply a commitment to a rate-increase path and should be reserved for strong and widening price pressures.
Economic risks
Arguments for Reviewing Rates
Failing to respond to sustained inflation could mean falling behind the curve and weakening inflation control.
Arguments for Waiting
Premature tightening could impose significant economic costs, particularly amid continuing external uncertainty, while signs of overheating remain muted.
- Policy repo rate
- 5.25%, which Bhattacharya said may look somewhat accommodative against projected inflation of 5%.
- Projected CPI inflation
- Average headline CPI inflation was forecast at 5% for FY27, with a path reaching 5.9% in the third quarter.
- Projected growth
- Economic growth was projected at 6.7%.
- Credit growth
- Credit growth was reported at 18% and above.
- Manufacturing capacity utilisation
- The latest RBI survey showed capacity utilisation above 77%.
- August decision
- Bhattacharya voted to hold the repo rate, judging it appropriate given the economic costs of early tightening and inflation risks.
- External balance
- He said the current account deficit was comfortable but that tariffs, energy prices, supply chains, and logistics required monitoring.