After a very strong run, India’s economy is set to cool but annual GDP growth is still on course to average an impressive 7% from 2026-2028. Rising food prices on account of a weak monsoon will push headline inflation above the upper bound of the RBI’s 2-6% target range over the coming months. The central bank kicked off a tightening cycle this month and we expect a further 50bps of hikes to the repo rate to 6.00% by the end of Q1-2027. That is already a more hawkish view than the consensus, but we think the risks are skewed towards more aggressive tightening.
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