India’s ‘sugar high’ warrants caution on RBI hikes, JPMorgan Chase & Co.’s Jahangir Aziz says

India’s economy may be enjoying a “sugar high” from earlier stimulus that is set to eventually fade, according to JPMorgan Chase & Co.’s Jahangir Aziz, who warned that markets may be pricing in too many interest-rate increases.

The Reserve Bank will probably deliver an initial quarter-point increase this year, in part because policymakers have strongly signaled such a move, the co-head of the investment bank’s economic research department told Bloomberg Television’s Paul Allen on Friday. However, he’s less certain about what follows. Financial markets imply about 100 basis points of hikes this year.

“The economy is on a sugar high. You know what happens when the sugar high fades,” Aziz said. “If you start moving interest rate up, most likely there will be an impact on both investment as well as on consumption.”


Also Read: Moody’s raises India FY27 growth forecast to 7% from 6% on resilient economy, stronger investment

Aziz said India’s solid economic expansion of nearly 8% in the latest quarter from a year earlier needs to be viewed against substantial policy support in the second half of 2025. This included cuts to borrowing costs and the goods-and-services tax as well as regulatory easing that helped accelerate credit growth.

He noted that another round of GST cuts appears unlikely, while rapid credit expansion could increasingly concern regulators.

Also Read: ‘Fed’ up with inflation? US rate hike leaves RBI with an October-or-December dilemma, economists say

That leaves the RBI facing a difficult judgment over how much tightening the economy can absorb. Excess banking-system liquidity has kept some market rates well below the policy rate, Aziz said, but tighter financial conditions could eventually weigh on both business investment and household consumption.

“I think one needs to be careful and wait and see the impact of the rate hikes on both financial conditions internally as well as on real activity before saying that the RBI is going to be on the rate hiking cycle,” he said.