New Delhi, Aug. 3 -- When the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) meets this week, it will face a choice between holding the policy repo rate and raising it from the current level of 5.25%. Both courses of action have some justification. A pause makes sense given that economic growth remains robust and inflation has surpassed the RBI's 4% target rate only once this year (in June 2026).

A pre-emptive rate hike to shield against inflationary pressures and protect capital inflows also seems justified-after all, many advanced economy central banks (Europe, Japan, Australia) began tightening earlier this year. If the RBI chooses to pause, as widely expected by market experts, will it fall behind the curve? A centra...