'RBI may struggle to meet 4% inflation target': Economist flags fastest money, credit growth since 2012-13
I worry we are underestimating the risk of persistent inflation while focusing our policy efforts on pushing the rupee higher, says ISB professor Prasanna Tantri
- Nov 11, 2026,
- Updated Nov 11, 2026 8:53 PM IST
Indian School of Business professor Prasanna Tantri has warned that the Reserve Bank of India (RBI) may struggle to bring inflation back to its 4% target as money supply and bank credit expand at their fastest combined pace in more than a decade.
He said policymakers risk underestimating persistent inflation while focusing on strengthening the rupee.
Citing RBI data for October 31, Tantri said currency in circulation increased 14.2% year-on-year, while cash held by the public rose 14.7%. Broad money growth accelerated from 16% to 16.5% in just a fortnight.
Bank credit to the commercial sector grew 19.4%, compared with 11.2% a year earlier.
"No financial year since 2012–13 has ended with broad money and credit growing this fast together. Even in the pandemic year of 2020–21, broad money grew 12.2% and commercial credit about 6%," Tantri wrote in a post.
The professor questioned whether inflation could return to the RBI's medium-term target with money and credit expanding at the current pace. "At this pace, I find it hard to see how the RBI meets its 4% inflation target even in the medium term, let alone the short term," he said.
Read More: Will October inflation breach 6%? What it means for interest rates, EMIs and GDP growth
Tantri acknowledged that favourable external conditions could help ease price pressures temporarily but cautioned that these may not be enough. "Cheaper oil and a good monsoon may offer temporary relief. But at the current pace of real growth, meeting the target would require a sustained fall in the velocity of money: each rupee would have to change hands less often. That looks unlikely to me," he said.
He also questioned the focus of monetary policy amid rising inflation risks. "I worry we are underestimating the risk of persistent inflation while focusing our policy efforts on pushing the rupee higher," the finance professor said.
October inflation expected to approach 6%
Tantri's warning comes ahead of India's October retail inflation data, scheduled for release on Thursday, November 12.
Retail inflation rose to 5.54% in September from 4.83% in August, according to official data. Food inflation reached 7.74% in September.
Economists expect consumer inflation to accelerate further in October, driven largely by higher food prices following uneven and deficient monsoon rainfall.
An Informist poll of 12 economists projects retail inflation at 6%, while Bloomberg Economics expects 6.1%. Nirmal Bang Institutional Equities has also estimated inflation at 6%.
A separate Reuters poll of 36 economists forecasts inflation at 5.93%, just below the RBI's upper tolerance limit of 6%.
Food prices remain the biggest concern. India Ratings and Research expects food inflation to reach 9.1%, while Bloomberg Economics projects 8.8%. Higher prices of cereals, pulses, edible oils and dairy products are expected to contribute to the increase.
Underlying price pressures are also expected to strengthen. Bloomberg Economics estimates core inflation at 4.5% in October, up from 4.3% in September. If the forecasts materialise, October inflation would move further above the RBI's 4% target.
Indian School of Business professor Prasanna Tantri has warned that the Reserve Bank of India (RBI) may struggle to bring inflation back to its 4% target as money supply and bank credit expand at their fastest combined pace in more than a decade.
He said policymakers risk underestimating persistent inflation while focusing on strengthening the rupee.
Citing RBI data for October 31, Tantri said currency in circulation increased 14.2% year-on-year, while cash held by the public rose 14.7%. Broad money growth accelerated from 16% to 16.5% in just a fortnight.
Bank credit to the commercial sector grew 19.4%, compared with 11.2% a year earlier.
"No financial year since 2012–13 has ended with broad money and credit growing this fast together. Even in the pandemic year of 2020–21, broad money grew 12.2% and commercial credit about 6%," Tantri wrote in a post.
The professor questioned whether inflation could return to the RBI's medium-term target with money and credit expanding at the current pace. "At this pace, I find it hard to see how the RBI meets its 4% inflation target even in the medium term, let alone the short term," he said.
Read More: Will October inflation breach 6%? What it means for interest rates, EMIs and GDP growth
Tantri acknowledged that favourable external conditions could help ease price pressures temporarily but cautioned that these may not be enough. "Cheaper oil and a good monsoon may offer temporary relief. But at the current pace of real growth, meeting the target would require a sustained fall in the velocity of money: each rupee would have to change hands less often. That looks unlikely to me," he said.
He also questioned the focus of monetary policy amid rising inflation risks. "I worry we are underestimating the risk of persistent inflation while focusing our policy efforts on pushing the rupee higher," the finance professor said.
October inflation expected to approach 6%
Tantri's warning comes ahead of India's October retail inflation data, scheduled for release on Thursday, November 12.
Retail inflation rose to 5.54% in September from 4.83% in August, according to official data. Food inflation reached 7.74% in September.
Economists expect consumer inflation to accelerate further in October, driven largely by higher food prices following uneven and deficient monsoon rainfall.
An Informist poll of 12 economists projects retail inflation at 6%, while Bloomberg Economics expects 6.1%. Nirmal Bang Institutional Equities has also estimated inflation at 6%.
A separate Reuters poll of 36 economists forecasts inflation at 5.93%, just below the RBI's upper tolerance limit of 6%.
Food prices remain the biggest concern. India Ratings and Research expects food inflation to reach 9.1%, while Bloomberg Economics projects 8.8%. Higher prices of cereals, pulses, edible oils and dairy products are expected to contribute to the increase.
Underlying price pressures are also expected to strengthen. Bloomberg Economics estimates core inflation at 4.5% in October, up from 4.3% in September. If the forecasts materialise, October inflation would move further above the RBI's 4% target.