JPMorgan Says India's Economy Is in a Short-Term Sugar High, Urges Caution on RBI Rate Hikes

JPMorgan economist Jahangir Aziz said India's economy is in a "short-term sugar high" created by earlier stimulus measures, and warned that markets may be pricing in too many rate hikes. According to Sina Finance, Aziz said the Reserve Bank of India is likely to deliver its first 25-basis-point rate hike this year, partly because policymakers have sent strong signals, but he is uncertain about the policy path after that. He said financial markets currently expect about 100 basis points of rate hikes this year. Aziz also said India's recent nearly 8% year-on-year economic growth in the latest quarter should be viewed alongside large policy support in the second half of 2025, including rate cuts, lower goods and services tax, and deregulation to speed up credit growth. Aziz said another round of goods and services tax cuts appears unlikely, while rapid credit expansion is increasingly worrying regulators. He added that the banking system's ample liquidity has kept some market rates well below policy rates, but tighter financial conditions would eventually weigh on both corporate investment and household consumption. "I think caution is warranted," he said, adding that the RBI should first observe the impact of rate hikes on domestic financial conditions and real economic activity before deciding whether to begin a hiking cycle.