RBI has done what it can with interest rates, but heavy lifting on inflation will fall on government
The Reserve Bank of India has hiked interest rates to combat inflation, citing rising fuel and food costs as primary drivers. The central bank has shifted its stance to 'calibrated tightening' while noting that the government must take the lead on supply-side inflation issues.
Why it matters
Monetary policy decisions directly impact the cost of living, borrowing, and economic growth for the entire nation.
The decision of the Reserve Bank of India’s Monetary Policy Committee to hike interest rates was seeming increasingly inevitable in the run-up to its meeting that started on Monday (October 5, 2026).
Inflation in the July-September 2026 quarter came in at 4.9% as opposed to the 4.7% predicted by the RBI in its previous monetary policy review. The main driver of this has been fuel and food inflation. Looking ahead, the RBI predicts inflation will be 6% in Q3 — its upper comfort limit — and 5.7% in Q4.
Global oil prices have been shooting up once again thanks to a resumption of military action in Iran following a brief ceasefire. While the oil marketing companies, at the behest of the government, have as yet refrained from passing this increase on to consumers, the longer this situation persists, the harder that eventuality will be to resist.
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