RBI likely to raise rates by 50 bps by December, Crisil’s top economist says 

New business data points to the fact that The Reserve Bank of India (RBI) could raise the repo rate by another 50 basis points by December, with 25-basis-point hikes anticipated in October and December, as renewed oil price shocks, elevated input costs and monsoon-related risks keep inflationary pressures elevated, according to Crisil Chief Economist Dharmakirti Joshi.

The repo rate at present stands at 5.25 percent. A recent Moneycontrol poll indicated that the RBI Monetary Policy Committee (MPC) could raise interest rates in October.

“Based on certain assumptions for this year, we believe that one interest-rate gain is likely to happen in October and another one could happen in December. The oil price shock has re-emerged. Input costs stay high, and the monsoons are additionally a risk that seems to be materialising,” Joshi stated in an interview.

“There is a supply shock, but expansion is firm, so under these conditions I think there is a possibility of generalised inflation,” he further noted.

Joshi has estimated FY27 inflation at 5.1 percent, while warning that upside risks stay. He stated inflation rising above 6 percent is not part of the firm's base case, although the risks stay.

Crisil has additionally boosted its Brent crude forecast for FY27 to $88-$93 a barrel from around $80-$87 earlier.

Brent crude prices have noted sharp fluctuations since the war in West Asia broke out. Crude prices are at present trading above $100 a barrel, with the Strait of Hormuz blocked.

“With geopolitical tensions between the United States and Iran being renewed every now and then, resulting in supply chain disruptions, it has become difficult to give a specific forecast of the level of crude prices,” Joshi stated.

Elevated crude prices are a concern for India's import bill, which could in turn put pressure on the current account deficit and the indian rupee.

Room for indian rupee to appreciate

Joshi stated there is room for the indian rupee to appreciate by the end of the fiscal year, considering the currency's recent depreciation. The indian rupee has been trading around Rs 96 to the dollar for the past two weeks.

Joshi, that stated, forecasts the indian rupee at Rs 93.50 to the dollar by the end of March 2027.

“Historically, I think the currency has always reverted to its trend. And it has depreciated quite a bit. It is at present undervalued. We are expecting an gain in foreign direct investment (FDI) inflows this year,” Joshi stated.

The view is based on expectations of stronger FDI inflows and softer repatriations compared with last year. Joshi additionally anticipates India's balance of payments (BoP) to turn positive this year.

Joshi stated India's balance of payments surplus is at present estimated at $65 billion to $100 billion, although the impact on next fiscal year's BoP is yet to be determined.