RBI Should Act in October on Rates, Economist Warns of External Pressures

The Reserve Bank of India should not delay monetary policy action until its December meeting and instead move to hike the repo rate in October, according to economist Pranjul Bhandari, who cautioned that the external environment remains "unforgiving" for the Indian economy.

Bhandari's assessment reflects growing concerns about global economic headwinds and their potential impact on domestic inflation and currency stability. The economist argued that delaying a rate adjustment could complicate the central bank's policy response if external pressures intensify further in the coming weeks.

Any rate increase should be coupled with liquidity management operations to absorb surplus cash from the financial system, Bhandari suggested. Such a combined approach would help the RBI address both inflation concerns and maintain stability in money markets without exacerbating financial conditions.

The call for earlier action underscores ongoing debate within policy circles about the appropriate pace and timing of monetary tightening. The RBI has been navigating competing pressures from domestic growth concerns and inflation management while keeping an eye on global developments that could affect India's external position.