Facing renewed pressure on the rupee and heightened global uncertainties amid the ongoing conflict in the West Asia, the Reserve Bank of India (RBI) is widely expected to keep policy rates unchanged in its upcoming monetary policy review and keep the stance unchanged, according to a poll of 12 economists.
External Shocks
The Monetary Policy Committee (MPC) is scheduled to announce its decision on April 8. At its last meeting, the six-member body had unanimously retained the repo rate at 5.25% and continued with the neutral stance. Most economists expect the central bank to remain in a wait-and-watch mode as it assesses the evolving impact of geopolitical tensions on growth, inflation and the external sector.
“We do not expect any change in rates at this juncture. It is too early for the RBI to react to what is essentially a supply shock,” said Indranil Pan, chief economist at YES Bank, noting that inflation averaged at 2.1% last year and fiscal measures continue to cushion part of the fuel and fertiliser pressures.
Pan added that recent steps to curb speculative currency positions may slow depreciation but do not alter underlying fundamentals. “External sector pressures have increased the risk premium India must pay to attract capital, which limits the scope for monetary easing,” he said.
Inflation Recalibration
Economists expect some upward revision to inflation projections, though estimates differ. Sakshi Gupta, chief economist at HDFC Bank, said the RBI is likely to stay on hold “given the uncertainty surrounding the conflict and its evolving impact on inflation and growth.”
She expects CPI projections to be revised upward to around 4.5% for FY27, reflecting higher LPG prices and gradual energy pass-through. Barclays projects FY27 growth at 6.8% and inflation at 4% and expects the rate and stance to remain unchanged. “We expect continued liquidity support and timely foreign exchange intervention to keep financial conditions stable,” said Aastha Gudwani, India Chief Economist at Barclays.
However, Bank of Baroda chief economist Madan Sabnavis, said that they do not expect any measures for either liquidity or currency management “as the central bank would intervene as an when required”
Dipti Deshpande, Principal Economist at Crisil, expects CPI inflation to average around 4.3% in FY27 under a base case of limited crude pass-through. “While the government may mitigate the direct impact of higher crude prices, prolonged energy disruptions could shrink monetary policy space as indirect pressures filter into core inflation,” she said.
On growth, economists do not foresee a sharp downward revision at this stage but expect the RBI to flag risks. Sameer Narang, Chief Economist at ICICI Bank, said policy would need to remain “nuanced” amidst the dual impact on growth and inflation. “Revisions will definitely be done to inflation and growth forecasts depending on what assumption is taken for oil and the rupee,” he said.
While consensus points to a pause, some expect a firmer tone. “CPI projections may be revised upward and growth forecasts marked down. The tone is likely to be firm,” said Anitha Rangan, Chief Economist at RBL Bank, adding that additional currency-management measures and even a mid-cycle hike cannot be ruled out if risks intensify.
The rupee has witnessed sharp swings in recent sessions, briefly weakening past 95 against the dollar before retracing some losses. With oil prices elevated and geopolitical tensions clouding the outlook, the RBI is likely to emphasise inflation vigilance while keeping policy flexibility intact.