RBI likely to deliver three more rate hikes by June 2027

NEW DELHI — Goldman Sachs' Chief India Economist Santanu Sengupta said the Reserve Bank of India is likely to raise interest rates three more times by June 2027, totalling about 75 basis points, a new report has said.

The report from NDTV Profit cited Sengupta said that India should still manage roughly 7 per cent economic growth. Sengupta warned that El Nino poses a material downside risk to growth and an upside risk to inflation in 2027.

Despite that, India will be able to achieve approximately 7 per cent economic growth, which is impressive considering that we are an oil importer operating within this type of global climate, he said.

Goldman Sachs has projected that the RBI will implement rate hikes in December, February, and either April or June.

"We would have one more hike in February, and after that perhaps the RBI can take a break to evaluate the situation, and then implement one final hike in April or in June," Sengupta said.

The economist stressed that El Nino has yet to be fully accounted for by many financial market participants as climate threats pose a greater risk for 2027 than for 2023.

Though the kharif harvest will be relatively unaffected by the El Nino event, it represents a more back-end risk, Sengupta said.

He noted that current inventory levels will help contain inflationary pressures for the immediate future. "El Nino Lower reservoir levels may harm the rabi harvest. Additionally, with diminished stock levels by 2027, inflation could accelerate into 2027,” Sengupta said.

"There is a downside to economic growth and an upside to inflation as a result of El Nino in 2027," he added.

He flagged crude oil as the biggest risk, saying projections assume $85–$95 per barrel but sustained $100-plus oil would represent a greater impediment to economic growth and inflation.

"There is little additional scope for stimulating the economy through either GST cuts or income tax cuts," Sengupta added.