Mumbai, February 25 The chances of the benchmark interest rate going up are "negligible," despite the build-up of inflationary pressure due to geopolitical tensions, said Saugata Bhattacharya, an external member of the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), on Wednesday.
Weather risks, rising metal prices, and high crude oil prices amid geopolitical tensions will weigh on consumer price inflation (CPI) going forward, Bhattacharya said.
"I see little chance of needing to raise the repo rate in the near term," he told
Bhattacharya and the other five members of the MPC voted unanimously to keep the repurchase rate (repo rate) at 5.25 per cent at the policy meeting earlier this month. The RBI maintained its neutral policy stance, signaling that rates will remain low for some time.
In the interview, he said there are no signs of any overheating of the economy despite the multiple stimulus measures.
The RBI has cut rates by a total of 125 basis points since February 2025, marking its most aggressive easing cycle since 2019. It reduced rates by 25 basis points at its December meeting.
The central bank kept the rate unchanged in the August, October, and February 2026 monetary policies.
On the inflation front, he said that CPI is forecast to rise towards the 4 per cent target in H1 FY27. "One reason is the base effects of falling headline (and vegetable) inflation in FY26, which will now reverse. Second, the effect of precious metal prices. Excluding these, the underlying inflation is expected to remain benign," he said.
Highlighting improving credit uptake, Bhattacharya said non-retail bank credit growth has steadily increased and is now flowing to large corporates as well.
"Credit growth to large corporates rose to 7.5 per cent year-on-year (YoY) in December 2025 (from 5.5 per cent in December 2024) and to mid corporates at a continuing high 20 per cent YoY. Credit to MSMEs rose 29 per cent YoY (from 12 per cent in December 2024). Growth of credit to NBFCs too has risen almost 3x in December 2025," he said, adding that capacity utilization remains around 75 per cent, though higher in certain sectors.
On growth, he said domestic consumption, which accounts for almost two-thirds of GDP, will remain the primary driver, though both domestic and external demand are necessary for sustained expansion.
"The effects of the fiscal, monetary, and liquidity stimulus are still playing out. Data suggests a pickup in private investment in H1 FY26 and even FDI seems to be reviving," he said.
He also pointed to strong high-frequency indicators, including reasonably strong Manufacturing and Services PMIs in January, robust merchandise exports despite US trade frictions, and record-high monthly e-way bills indicating firm manufacturing activity.
Furthermore, he said that it was early days for global trade developments following the US ruling on reciprocal tariffs and that tariff competitiveness with key competitors remains in flux.
"We await tariffs and trade deals with the US settling down to some equilibrium. In the meantime, trade data suggests that Indian exporters have largely diversified their destinations (other than a few sectors)," he said.
On the upcoming new GDP, CPI, and IIP series, he said that the revised methodologies and updated surveys will better reflect the current structure of the economy and allow for more accurate policy calibration.