RBI report says India’s neutral interest rate has risen after pandemic

The Reserve Bank of India (RBI) has revised its estimates of the neutral rate of interest for Q3-2022-22 from 0.8-1.0 per cent to 1.1-1.3 per cent, reflecting GDP data revisions. The current range suggests a wide range between 1.4-1.9 per cent for Q4-2023-24. The natural rate of interest is the real interest rate accounting for inflation and is generally associated with the rate of interest at which an economy runs at optimal capacity without stoking inflation.