The Monetary Policy Committee approved a 25‑basis‑point hike, the first such increase in almost four years, on Wednesday during its Delhi session. The decision follows a September consumer‑price index that climbed to 5.54% on account of surging onion and other food prices, keeping the index just inside the RBI’s 4 % target band.
In a speech to NDTV, Malhotra likened unchecked inflation to a hidden tax on every citizen, underscoring the central bank’s unwavering commitment to a 4 % price‑stability goal with a ±2 % tolerance range. He warned that higher policy rates would raise the cost of credit for all but were necessary to curb inflation, which he described as a “supply‑side drag” mainly driven by food and fuel.
Malhotra added that the supply‑side pressures stem from persistent shortages and logistical bottlenecks, which have kept food and fuel prices elevated. He noted that the RBI’s 2016 inflation‑targeting framework had kept the rate within the tolerance band, even as the economy continued to grow.
India’s economy finished the first quarter of FY27 at 7.8% growth, buoyed by 12% expansion in investment, double‑digit growth in exports and robust services activity. The RBI’s policy shift aims to keep this momentum intact while preventing a spill‑over into the broader economy.
The RBI will monitor inflation data closely and may adjust rates again at its next policy meeting, scheduled for early October. Market analysts expect the hike to temper credit demand, potentially slowing short‑term borrowing but keeping inflationary pressures in check.