The Reserve Bank of India’s Monetary Policy Committee unanimously voted to keep the benchmark repo rate unchanged at 5.25% at its first MPC meeting of the financial year. The committee also decided to maintain the policy stance as ‘neutral.’ RBI Governor Sanjay Malhotra said that amid evolving political and economic conditions, headline inflation remains contained below the 4% target.
The central bank’s primary mandate is to maintain inflation at 4%, with a tolerance band of +/-2%. However, Malhotra added that upside risks to the inflation outlook remain elevated, driven by higher energy prices and potential weather-related disruptions that could affect food prices.
“The MPC further noted that high-frequency indicators up to February suggest a continuation of strong momentum in economic activity. Growth impulses continue to be supported by robust private consumption and investment demand. However, the West Asia conflict is likely to impede this growth,” Malhotra said.
1 April 2026
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Growth Outlook
Evolving geopolitical conditions could adversely impact export and services growth, investment, and private consumption, while higher energy costs may lead to imported inflation and a widening current account deficit. Against this backdrop, the central bank has projected real GDP growth for FY27 at 6.9%. Growth for the first quarter is projected at 6.8%, followed by a slight moderation to 6.7% in the quarter ending September. Growth in the third and fourth quarters is estimated at 7.0% and 7.2%, respectively.
“Further escalation and a wider spread of the conflict, heightened volatility in global financial markets, and weather-related events could weigh on the domestic growth outlook,” Malhotra said.
Inflation Outlook
Malhotra stressed that the recent surge in energy prices due to the ongoing West Asia conflict has emerged as a key risk to the inflation outlook. He said the food price outlook remains comfortable in the near term, supported by robust rabi production, adequate reservoir levels, and comfortable buffer food stocks. However, he added that the possible emergence of El Niño conditions could pose an upside risk.
Accordingly, CPI inflation for FY27 is projected at 4.6%, with Q1 at 4.0%, followed by 4.4% in Q2, 5.3% in Q3, and easing to 4.7% in Q4. Core inflation is projected at 4.4%.
(This is a developing story.)
