Societe Generale’s Kunal Kundu has revised the outlook for the Reserve Bank of India’s (RBI) monetary policy, now anticipating three 25 basis point rate hikes, which would raise the repo rate from 5.25% to 6.00% by early 2027. This is an increase from the previously expected two hikes. The revision comes in response to much stronger-than-expected Indian GDP data and a more hawkish outlook from the Federal Reserve, both of which reduce perceived growth risks and heighten concerns about inflation and external stability [1].
According to Societe Generale, the stronger economic activity profile suggests that the Indian economy is operating with less spare capacity than the RBI’s current FY27 growth projection of 6.7% implies. The robust growth increases the likelihood that existing pressures from food, fuel, and input costs could spill over into core inflation. As a result, the downside growth cost of additional monetary tightening is reduced, justifying a more extended tightening cycle [1].
Societe Generale argues that with inflation risks tilted upwards and global monetary conditions becoming less supportive, a 50 basis point tightening cycle would be insufficient to restore an appropriate real policy-rate buffer. Therefore, they now expect a cumulative 75 basis points of RBI tightening, likely delivered in measured 25 basis point increments at successive meetings in October, December, and February, as evidence of inflation persistence and external pressure accumulates [1].
CONCLUSION
Societe Generale’s revised forecast signals a more aggressive RBI tightening path, driven by stronger-than-expected growth and rising inflation risks. The anticipated rate hikes could impact borrowing costs and market liquidity, reflecting a medium market impact. Investors and market participants should monitor upcoming RBI meetings for confirmation of this policy trajectory.