New Delhi: Reserve Bank of India Governor Sanjay Malhotra has defended this month's rate hike with a plain argument: rising prices hurt everyone. "If there is high inflation, then it's like a tax on everyone," he said at the NDTV World Summit in Delhi on Friday. "We are steadfast in our commitment to meet our goal of price stability."
The RBI's six-member Monetary Policy Committee voted unanimously to raise the repo rate by 25 basis points to 5.50 per cent this month, the first hike in nearly four years, and shifted its stance to "calibrated tightening". Minutes of the meeting, released on Wednesday, showed members worried that price pressures were spilling over into a range of goods. Retail inflation, measured by the consumer price index, rose to 5.54 per cent in September, driven by onion and other food prices, staying just inside the RBI's tolerance band.
Malhotra said the government has mandated the RBI to hold inflation at 4 per cent with a margin of two percentage points on either side. "While we are taking this action of increasing the policy repo rate, even though it means higher interest rates... it is with the objective of curtailing inflation which is in everyone's interest," he said.
He described the current spell of inflation as largely a supply-side problem rooted in food and fuel. The Governor also pointed to resilient growth. India's GDP grew 7.8 per cent in the first quarter of 2026-27, he said, backed by a 12 per cent rise in investment and double-digit export growth, with high-frequency indicators such as cement, steel, credit and auto sales holding up. The hike, he said, would raise the cost of credit, but that was a deliberate trade-off to protect the value of money.