The Reserve Bank of India (RBI) is likely to raise interest rates three more times by June 2027, totalling approximately 75 basis points, according to Goldman Sachs Chief India Economist Santanu Sengupta. Despite the projected tightening cycle, India is expected to sustain roughly 7 per cent economic growth — a resilient outcome for an oil-importing economy navigating a challenging global climate.

Projected Rate Hike Timeline

Goldman Sachs has mapped out a specific sequence for the anticipated hikes. According to Sengupta, the RBI is expected to move in December, February, and then either April or June. “We would have one more hike in February, and after that perhaps the RBI can take a break to evaluate the situation, and then implement one final hike in April or in June,” Sengupta said. The phased approach suggests the central bank may pause mid-cycle to assess inflation and growth dynamics before delivering the terminal hike.

El Nino: The Key Downside Risk

Sengupta flagged El Nino as a material downside risk to growth and an upside risk to inflation heading into 2027. He noted that many financial market participants have yet to fully price in the climate threat, arguing that it represents a greater risk for 2027 than it did in 2023. While the kharif harvest is expected to remain relatively unaffected, Sengupta warned that lower reservoir levels could harm the rabi harvest. “El Nino lower reservoir levels may harm the rabi harvest. Additionally, with diminished stock levels by 2027, inflation could accelerate into 2027,” he said. Current inventory levels, he added, should help contain inflationary pressures in the near term.

Crude Oil: The Biggest Wildcard

Beyond El Nino, Sengupta identified crude oil prices as the single largest risk to his projections. Goldman Sachs’ baseline assumption places crude in the $85–$95 per barrel range, but sustained prices above $100 per barrel would pose a significantly greater drag on both growth and inflation. India, as a net oil importer, remains acutely vulnerable to prolonged energy price shocks, which could widen the current account deficit and complicate the RBI’s monetary calculus.

Limited Fiscal Room to Cushion Any Slowdown

Sengupta also cautioned that fiscal policy offers little buffer if growth disappoints. “There is little additional scope for stimulating the economy through either GST cuts or income tax cuts,” he said. This effectively means that monetary policy and the trajectory of global commodity prices will carry the bulk of the macroeconomic adjustment burden in the period ahead. Notably, this assessment arrives at a time when the Centre has been under pressure to provide cost-of-living relief ahead of a busy state election calendar.

Growth Outlook Despite Headwinds

Even accounting for the above risks, Sengupta maintained that India would achieve approximately 7 per cent GDP growth — a figure he described as impressive given that India is an oil importer operating in this type of global environment. The projection is broadly in line with other institutional forecasts, though the El Nino and crude oil risks could shave meaningful fractions off that estimate if they materialise simultaneously. All eyes will now be on the RBI’s next monetary policy committee meeting for signals on whether the central bank’s own projections converge with the Goldman Sachs view.