The latest activity data suggest that India’s economy is slowing, but we think GDP growth should average 6.5% in 2026-27 - an enviable rate by global standards. Rainfall in the early stages of the monsoon has been weak, and if this remains the case it would add to upside inflation risks. Meanwhile, the renewed rise in oil prices has pushed the rupee back close to a record low against the US dollar. Ultimately, rising inflation and continued FX concerns will force the RBI to raise interest rates before long. We expect 75bps of hikes to the repo rate to 6.00% by early 2027 – a more hawkish view than the consensus.
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