The Reserve Bank of India (RBI) unveiled the first bi-monthly monetary policy verdict for the new fiscal 2026-27 (FY27) on Wednesday, April 8, and unanimously decided to maintain the status quo on interest ratesfor the second consecutive meeting. RBI Governor Sanjay Malhotra-led monetary policy committee pegged the full year consumer price index-based inflation for FY27 at 4.6% amid increased risk outlook and price shock due to the economic impact of the US-Iran geopolitical conflict.
The headline inflation remains contained and below target range, as per RBI Governor Malhotra. The quarterly CPI inflation estimates for FY27 were hiked from the ones decided in the February policy meeting. While highlighting the risks to India's inflation trajectory, RBI Governor said in his address, ''The upside risks to the inflation outlook driven by increased energy prices, pressures, and probable weather disturbances affecting food prices have increased."
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RBI's Inflation Projections for FY27
For the new fiscal, the CPI inflation is projected at 4.6%, with quarterly estimates of 4.0% in Q1 and 4.4% in Q2. While RBI MPC's inflation projection for Q1 remains the same, it has been revised marginally upwards for Q2 from 4.2% earlier. The inflation is seen rising to 4.2% in Q3 and further to 4.7% in Q4FY27. The RBI Governor added that India's core inflation pressure remains muted, however, the central bank will 'keep giving core inflation forecasts going ahead'.
RBI inflation projections for FY27
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According to the central bank, the elevated crude oil price could increase India's CPI inflation and widen the current account deficit. CPI inflation figures for the first two months of 2026 remained below RBI's 2-6% target range. The recent spike in energy prices emerged as risk to inflation though retail petrol prices remain stable,'' said RBI Governor in his address.
He cautioned that supply disruptions stemming from the Middle East conflict could impact certain key manufacturing sectors and pose downside risks to India's growth, which has reignited inflationnary pressures in the economy. Malhotra explained that the government has already taken measures to mitigate the adverse effects of the Middle East war
The MPC opined the intensity and duration of conflict and its damage to infra is risk to inflation and growth outlook, said RBI Governor Malhotra, adding that it is 'prudent for the RBI to wait and watch the evolving growth-inflation outlook.' RBI Governor acknowledged the inflationary risks from higher global energy prices but expressed confidence in the macroeconomic fundamentals of the country.
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The RBI also revised the GDP growth estimate for F226 to 7.6% vs 7.3% earlier, while also noting that West Asia conflict may impede India's growth. The real GDP growth for the current financial year is seen at 6.9%. The central bank's policyholders kept the shirt-term lending rate or repo rate unchanged at 5.25% and maintained a 'neutral' policy stance in the review. The Standing Deposit Facility (SDF) rate remains at 5%, while the Marginal Standing Facility (MSF) rate was kept unchanged at 5.5%. The RBI has already cut the repo rate by a cumulative 125 basis points (bps) since February 2025.
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