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Informist, Wednesday, Oct. 7, 2026

MUMBAI - Madhavi Arora, chief economist, Emkay Global Financial Services Ltd., said the following on the Reserve Bank of India's fourth bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Wednesday:

RBI hiked policy rates by 25 basis points and adopted a cautious tone, while the change in stance to another new nomenclature, "calibrated tightening" felt more like a forward guidance than a policy stance per se, but has prepared markets for a higher-for-longer interest rate environment. 

With US rates and growth higher and inflation proving stickier, India may need to offer a higher risk premium, particularly amid elevated global volatility, high oil prices and lacklustre natural dollar inflows. Global financial conditions could, thus, increasingly dictate the RBI's reaction function, alongside growth and inflation dynamics. 

From a signalling perspective, while the policy rate and liquidity stance will both incrementally tighten ahead, system liquidity is likely to remain >1% of Net Demand and Time Liabilities by end-March 2027, even with RBI's liquidity absorption in the coming months. We maintain a cumulative rate hike of 75 bps in this cycle, but will be watchful of the fluid global dynamics.

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Compiled by Divya Moolayattil

Filed by Himanshi Gupta

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