<p class="bodytext">Caution forced by global headwinds has informed the decision of the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) to keep the repo rate unchanged at its April meeting. The domestic and international scenarios have changed considerably since the committee’s previous meeting, with the war in West Asia looming over the country’s economy. Higher oil prices, a shortage of cooking gas, and the rupee clocking sharply lower levels have all posed challenges. In the RBI’s policy stance, there is a realistic acknowledgement of the prevalent risk factors, which is reflected in its decision to keep the rate unchanged at 5.25%. It has clearly stated its reasons: “The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook.”</p>.<p class="bodytext">Though the economy has shown relative macroeconomic strength, it has taken hits in recent weeks. It will be under strain with the return of migrant workers to their homes and the ongoing elections in some states. Supply chains remain disrupted by the war, and the outcome of the ongoing two-week ceasefire is unclear. The markets have soared, and international crude prices have fallen, but the uncertainty is palpable. Even if the ceasefire lasts, it will take months for the supply chains to regain normalcy. A likely shortfall in fertiliser production threatens to affect agricultural output, reducing rural incomes and raising food prices. The MPC would have taken into consideration this instability and uncertainty while making its decision on the interest rate.</p>.RBI keeps repo rate unchanged at 5.25%.<p class="bodytext">Amid these imponderables, the RBI has forecast a headline inflation at 4.6% in 2026-27. This is within its tolerance range, but a deviation from the recent trend of softening inflation. In spite of the moderation after the ceasefire, global fuel prices remain high. The RBI expects the economy to grow at 6.9% this year, down from the expected 7.6% in 2025-26. This could be taken only as an initial estimate, based on available information and the potential immediate impact of external factors on the economy. It could worsen as the situation unfolds. For example, the projection is based on the assumption of crude price at $85 per barrel. The actual price is likely to be higher. The RBI has said that “further escalation and wider spread of the conflict, heightened volatility in global financial markets and weather-related events, however, weigh on the domestic growth outlook”. Under the circumstances, the move to wait and watch is sensible and aligned with the larger stability agenda.</p>
<p class="bodytext">Caution forced by global headwinds has informed the decision of the Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) to keep the repo rate unchanged at its April meeting. The domestic and international scenarios have changed considerably since the committee’s previous meeting, with the war in West Asia looming over the country’s economy. Higher oil prices, a shortage of cooking gas, and the rupee clocking sharply lower levels have all posed challenges. In the RBI’s policy stance, there is a realistic acknowledgement of the prevalent risk factors, which is reflected in its decision to keep the rate unchanged at 5.25%. It has clearly stated its reasons: “The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook.”</p>.<p class="bodytext">Though the economy has shown relative macroeconomic strength, it has taken hits in recent weeks. It will be under strain with the return of migrant workers to their homes and the ongoing elections in some states. Supply chains remain disrupted by the war, and the outcome of the ongoing two-week ceasefire is unclear. The markets have soared, and international crude prices have fallen, but the uncertainty is palpable. Even if the ceasefire lasts, it will take months for the supply chains to regain normalcy. A likely shortfall in fertiliser production threatens to affect agricultural output, reducing rural incomes and raising food prices. The MPC would have taken into consideration this instability and uncertainty while making its decision on the interest rate.</p>.RBI keeps repo rate unchanged at 5.25%.<p class="bodytext">Amid these imponderables, the RBI has forecast a headline inflation at 4.6% in 2026-27. This is within its tolerance range, but a deviation from the recent trend of softening inflation. In spite of the moderation after the ceasefire, global fuel prices remain high. The RBI expects the economy to grow at 6.9% this year, down from the expected 7.6% in 2025-26. This could be taken only as an initial estimate, based on available information and the potential immediate impact of external factors on the economy. It could worsen as the situation unfolds. For example, the projection is based on the assumption of crude price at $85 per barrel. The actual price is likely to be higher. The RBI has said that “further escalation and wider spread of the conflict, heightened volatility in global financial markets and weather-related events, however, weigh on the domestic growth outlook”. Under the circumstances, the move to wait and watch is sensible and aligned with the larger stability agenda.</p>
