Reserve Bank of India (RBI) Governor Sanjay Malhotra announced on Wednesday that the six-member Monetary Policy Committee (MPC) has unanimously decided to keep the repo rate unchanged at 5.25 per cent. The central bank also maintained its policy stance as ‘Neutral’, signaling a cautious approach amid geopolitical and economic challenges.
RBI’s Policy Moves and Recent Rate Cuts
Since February 2025, the RBI has implemented a total rate cut of 125 basis points, marking its most aggressive easing cycle since 2019. The last rate cut was 25 basis points in December 2025, while the repo rate was held steady in the February 2026 MPC meeting.
Governor Malhotra highlighted that despite strong macroeconomic fundamentals, external shocks have weighed on the rupee, though India’s forex reserves remain robust at USD 696.1 billion as of April 3.
How Will Elevated Oil Prices Affect the Indian Economy?
The RBI Governor noted that high energy and commodity prices, combined with disruptions in the Strait of Hormuz, could impact growth in the current fiscal year. Government measures have ensured the supply of critical inputs, mitigating potential supply chain disruptions in key sectors. Analysts warn that sustained crude price spikes could inflate input costs for industries and pressure consumer prices.
Inflation and Retail Price Trends
The central bank projected CPI inflation at 4.6 per cent for 2026-27, indicating moderate price pressures. Retail inflation had previously dropped to a historic low of 0.25 per cent in October 2025, marking the lowest level since the CPI series was introduced. Governor Malhotra emphasized that while energy price shocks pose risks to inflation, the food price outlook remains stable in the near term.
GDP Growth Outlook and Economic Momentum
The RBI has revised India’s GDP growth for 2026-27 to 6.9 per cent, slightly down from 7.6 per cent in the previous fiscal. Malhotra acknowledged that geopolitical uncertainty continues to weigh on the economic outlook. However, he highlighted that high-frequency indicators suggest sustained momentum in economic activity, reflecting resilience in domestic demand and industrial output.
What Should Businesses and Investors Expect Next?
With the repo rate on hold, businesses can anticipate stable borrowing costs in the near term. Investors may monitor energy price fluctuations and rupee volatility, as these factors could influence corporate earnings and market sentiment. RBI officials are likely to maintain a careful, data-driven approach, balancing growth support with inflation containment.
Why did RBI keep the repo rate unchanged at 5.25% despite global risks?
The RBI cited geopolitical uncertainty in West Asia, rising crude oil prices, and rupee depreciation, while considering domestic macroeconomic stability and inflation trends, leading to a neutral policy stance.
How will the West Asia conflict impact India’s inflation and GDP?
Rising energy and commodity prices due to the conflict may pressure input costs and inflation, potentially moderating growth. Government interventions and supply chain management aim to minimize disruptions, keeping inflation and GDP within manageable ranges.
