The introduction of the new inflation index has more data points but lack context needed for proper interpretation, said economists. But the larger question is whether the Reserve Bank of India (RBI) will maintain its pro‑growth stance when the real rate falls below the neutral range, typically considered to be 1.4% to 1.9%.
“With the new CPI pushing inflation closer to 5%, it’s becoming increasingly difficult for the RBI to maintain a pro‑growth stance; a prolonged pause looks likely, but if inflation stays elevated, a rate hike cannot be ruled out, especially since India’s real growth challenges are structural and cannot be fixed by monetary easing alone,” said Dhanajay Sinha, CEO, Systematix Group. His concerns are the stagnant real wages, modest corporate revenue growth, margin pressures, rising input costs, and a weaker rupee will limit the RBI’s ability to revive growth, and the new inflation dynamics may constrain its pro‑growth stance.
Most economists expect a long pause in the RBI’s rate policy. “There may not be too much of an alteration in the inflation forecasts by the RBI for next year,” said Madan Sabnavis, chief economist at Bank of Baroda. Meanwhile, Gaura Sengupta, Chief Economist, IDFC FIRST Bank, said, “The shift to the new inflation series does not alter the RBI’s pro‑growth orientation. Even with the shift to the new inflation series, the RBI’s pro‑growth stance remains firmly intact.”
She added that the central bank is looking ahead to a 4–4.5% inflation trajectory for FY27. With policy rates unchanged, real interest rates will naturally fall further below the neutral zone, making the stance more accommodative over time. “Given robust real growth and a stable medium‑term inflation outlook, the RBI has room to stay on a prolonged pause while keeping its focus firmly on liquidity management,” Sengupta said.
Agreeing with her, Radhika Rao, Executive Director and Senior Economist, DBS Bank, said, “We don’t expect the new inflation series to meaningfully influence policy decisions in the near term, with an extended rate pause likely, supported by a positive cyclical upswing and confidence effects stemming from the successful conclusion of US‑India trade negotiations.”
“On the growth side, we need nominal growth more than real growth. The RBI will keep its liquidity measures in place, keeping yields lower at the shorter end. Alongside the OMO, this should help absorb longer‑end supply. Moderate inflation keeps the room open for liquidity support without inflation risks,” said Anitha Rangan, Chief Economist, RBL Bank. “We believe the RBI’s rate‑cutting cycle has come to an end, with the central bank likely to continue holding rates on pause for an extended period through CY26 at least,” added Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.
While the initial reaction has been a call for a long pause, economists caution that without historical back‑series data, it is difficult to reliably interpret trends or assess whether the higher print reflects genuine price pressures or simply a statistical reset. “To determine a comparative and futuristic perspective, we will have to wait for the series to stabilise,” said Indranil Pan, Chief Economist, YES Bank.