The Reserve Bank of India is widely expected to keep its policy repo rate unchanged at 5.25% when it announces its monetary policy decision on April 8, as policymakers weigh rising external risks, a gradual firming in inflation and signs of moderation in economic activity.
All 15 economists tracked by Bloomberg anticipate no change in the benchmark rate, pointing to a broad consensus that the Monetary Policy Committee will extend its pause while assessing evolving global and domestic conditions.
The meeting, scheduled from April 6 to 8, will be the first of the new financial year and comes against a markedly different backdrop from February, after tensions in the Middle East disrupted oil supply routes and pushed up crude prices.
Inflation Edges Higher
Inflation remains within the Reserve Bank's tolerance band, but recent data and global developments suggest upward pressure could build in the near term.
Consumer price inflation rose to 3.21% in February from 2.75% in January under the revised CPI series, reflecting increases in food and precious metal prices. While the level remains below the 4% target, cost pressures are beginning to strengthen.
Survey-based indicators point to rising input costs, with March PMI data showing the fastest increase in input prices in 45 months, indicating that pricing pressures are spreading across sectors. Economists expect inflation to move higher from recent lows, even if it stays broadly aligned with the target.
Barclays said the central bank is likely to remain on hold as it monitors these dynamics. “We expect the RBI MPC to keep the policy repo rate on hold and retain the neutral stance… We expect continued liquidity support and timely FX intervention to keep financial conditions stable,” the bank said.
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Growth Shows Strain
Economic activity continues to expand, but the pace of growth has eased in recent months, particularly in high-frequency indicators.
Manufacturing activity slowed in March, with the PMI falling to 53.8, its lowest level since September 2021. Services activity also moderated, with the PMI at 57.2, bringing the composite index down to 56.5. Businesses cited geopolitical tensions, volatile markets and rising costs as factors weighing on output.
At the same time, changes to the GDP base year are expected to lift headline growth estimates for FY26 to around 7.6%, compared with earlier projections, according to Bloomberg data, largely reflecting updated methodology rather than a shift in underlying momentum.
Madan Sabnavis of Bank of Baroda said the central bank is likely to stay on hold. “We do not expect any change in repo rate or stance this time. The tone will be cautious and what will be eagerly awaited is RBI's forecast of GDP and inflation under the prevailing uncertainty,” he said.
External Risks Intensify
Global conditions have become more volatile since the last policy review, with the escalation of conflict in the Middle East affecting energy markets and financial stability.
Crude prices surged sharply in March and, despite some easing, remain about 40% higher than levels seen before the conflict. Continued disruption in the Strait of Hormuz has constrained supply, raising concerns for inflation and external balances.
The rupee has weakened amid the volatility, falling more than 4% since the conflict began and touching a record low of 95.21 per dollar before recovering to around 93 following steps by the RBI to curb speculative pressures.
Transmission Remains Uneven
Despite a cumulative 125-basis-point reduction in the repo rate since February 2025, economists say the transmission of policy easing remains incomplete.
Recent market developments — including currency pressures, elevated funding costs and tighter financial conditions — have offset some of the intended impact of earlier rate cuts.
Economists expect the RBI to focus on maintaining liquidity and ensuring orderly market conditions rather than adjusting rates in the near term.
The April policy will also mark the central bank's first full set of projections for FY27 after it deferred annual forecasts in February due to the transition to new CPI and GDP series.
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