India's inflation risks are significantly higher than the Reserve Bank of India currently acknowledges, and price pressures could push inflation to 6-7 per cent in the coming quarters, potentially forcing the central bank to raise interest rates by 100-150 basis points, according to a new report by Systematix Institutional Equities.
The report, flagged in the Economic Times' market live blog on Monday, says the RBI's inflation projections underestimate the growing risks from rising input costs, elevated household inflation expectations and broadening price pressures across the economy.
"Upside risk beyond the projected 6% peak"
"With the stance now tightening, we see significant upside risk to inflation beyond the projected 6% peak," the report said, according to the ET live blog.
The warning comes days after the RBI surprised markets by shifting to a "calibrated tightening" stance and raising its growth and inflation forecasts — growth by 40 basis points to 7.1% and inflation by 20 basis points to 5.2%.
Economists see a deeper cycle
Economists broadly expect a longer and deeper rate-hike cycle. Deutsche Bank chief economist Kaushik Das expects a minimum 100 basis points of hikes, saying the cycle is "deeper and longer," while Kotak Mahindra Bank's Upasna Bhardwaj anticipates the repo rate moving towards 6% and DBS Bank India's Ashhish Vaidya projects a minimum 75 basis points of tightening in the current cycle.
The RBI has already raised the policy rate by 25 basis points and sees CPI inflation going up to 6% in Q3 and 5.7% in Q4 of 2026-27. EY India's D K Srivastava said one more hike at the December 2026 policy meeting "may not be ruled out."
Sources:
Stock Market Live: Inflation may surge to 6-7%, RBI may need to raise repo rate by 100-150 bps — Economic Times (live blog)
RBI's 'calibrated tightening' stance signals deeper rate hike cycle, say economists — CNBC TV18
The report, flagged in the Economic Times' market live blog on Monday, says the RBI's inflation projections underestimate the growing risks from rising input costs, elevated household inflation expectations and broadening price pressures across the economy.
"Upside risk beyond the projected 6% peak"
"With the stance now tightening, we see significant upside risk to inflation beyond the projected 6% peak," the report said, according to the ET live blog.
The warning comes days after the RBI surprised markets by shifting to a "calibrated tightening" stance and raising its growth and inflation forecasts — growth by 40 basis points to 7.1% and inflation by 20 basis points to 5.2%.
Economists see a deeper cycle
Economists broadly expect a longer and deeper rate-hike cycle. Deutsche Bank chief economist Kaushik Das expects a minimum 100 basis points of hikes, saying the cycle is "deeper and longer," while Kotak Mahindra Bank's Upasna Bhardwaj anticipates the repo rate moving towards 6% and DBS Bank India's Ashhish Vaidya projects a minimum 75 basis points of tightening in the current cycle.
The RBI has already raised the policy rate by 25 basis points and sees CPI inflation going up to 6% in Q3 and 5.7% in Q4 of 2026-27. EY India's D K Srivastava said one more hike at the December 2026 policy meeting "may not be ruled out."
Sources:
Stock Market Live: Inflation may surge to 6-7%, RBI may need to raise repo rate by 100-150 bps — Economic Times (live blog)
RBI's 'calibrated tightening' stance signals deeper rate hike cycle, say economists — CNBC TV18
