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Informist, Monday, Apr. 6, 2026

 

MUMBAI – Following are the expectations of economists from the meeting of the Reserve Bank of India's Monetary Policy Committee, which began Monday. The committee's decision will be announced Wednesday.

 

GAURA SEN GUPTA, CHIEF ECONOMIST, IDFC FIRST BANK

The April policy comes at a time when it may be too early to react to the unfolding West Asia crisis. RBI is expected to remain on pause, but communication will be key to keeping market expectations in check. The one-year overnight indexed swap is pricing in more than five rate hikes, reflecting market concerns over inflation. Moreover, post the RBI's net open position limits for banks, market's rate-hike expectations have increased further, as the move was seen as a sign of concern over the currency.

 

Communication will be the first line of defence to ensure that domestic financial conditions do not tighten further. As this is a supply-side shock, monetary policy— which operates largely through the demand channel—is not the appropriate policy tool.

 

The negative impact on growth will be more pronounced in the June quarter with the economy facing a combination of higher costs and supply-side disruptions. Real GDP growth in 2026-27 (Apr-Mar) is estimated at 7.0%, assuming the negative impact of the crisis is limited to the June quarter.

 

Headline CPI inflation is expected to average at 4.9% in FY27. Our inflation estimate indicates that headline CPI will not breach the upper threshold of the inflation targeting band of 6%. In the past, during a supply-side shock, RBI has hiked rates only when headline CPI inflation is already elevated. Given our FY27 CPI inflation estimate, we maintain the expectation of RBI remaining on pause. The next set of measures from the RBI need to be focused on boosting capital inflows, without raising domestic costs of funding.

 

SHILAN SHAH, DEPUTY CHIEF EMERGING MARKETS ECONOMIST, CAPITAL ECONOMICS

A limited inflationary impact from the surge in energy prices so far should enable the RBI to keep the repo rate on hold at 5.25% at the conclusion of the MPC meeting on Wednesday. But the pressure to tighten policy over the coming weeks and months will build if the West Asia conflict intensifies and in particular if the rupee comes under further downward pressure.  

 

The pace of the slide in the currency is clearly a worry for the RBI, which doesn't target a specific exchange rate but aims to mitigate volatility. In the event of a bigger terms-of-trade shock, pressure on the rupee would continue to build. At that point, the RBI may feel it needs to respond with fairly aggressive interest rate hikes. There's, of course, a very wide spectrum of potential outcomes but in the past decade or so, the repo rate has not risen above 6.50%. We think that lifting it back up to that level--which would imply 125 basis points of hikes--in a short space of time would be enough to provide substantial support to the rupee.

 

SONAL BADHAN, ECONOMIST, BANK OF BARODA

Globally, a lot has changed since the RBI announced its last policy in February. With the outbreak of the Iran war, crisis in the West Asia has become a point of concern. Market also remains highly volatile, which has pressurised foreign portfolio investor outflows from India, equity markets, bond yields and the rupee. Given this backdrop, RBI is likely to announce its full-year growth and inflation forecasts, keeping in view the impact of war on India.

 

We expect the RBI to keep the repo rate steady at 5.25% in its April policy. The stance is also expected to be maintained at neutral, as the central bank is likely to remain vigilant about the evolving situation. The tone will be more cautious than hawkish.

 

We also believe this to be the end of the rate cut cycle, and RBI will now remain on a prolonged pause. However, there may be measures announced to support liquidity and the rupee. Further, if oil prices remain above $100 per barrel for a consistently long period of time and inflation breaches the upper tolerance band of RBI of 6%, then there might be a chance of rate hike by the central bank towards the end of FY27.

 

CAREEDGE RATINGS

Amid a highly volatile global environment, we expect the RBI to maintain the status quo on the policy repo rate and the stance, while remaining vigilant of the evolving geopolitical scenario. The 'wait and watch' strategy will enable the RBI to preserve flexibility to gauge the emerging risks to growth and inflation dynamics and take a calibrated call on future rate actions.

 

Overall, the moderation in domestic growth prospects and heightened inflation risks amid the highly volatile global landscape have complicated the RBI's policy trade-offs, warranting a careful balance between supporting growth impulses and containing inflation pressures. The immediate effects of higher global crude oil prices on inflation are expected to remain somewhat contained, with the price increase burden being shared by the oil marketing companies and the government. This provides some cushion to the RBI to hold the rates steady for now.

 

ANZ BANKING GROUP

India has entered the current oil price shock from a position of relative strength. Before the flare-up in the West Asia conflict, domestic demand was rebounding. Headline inflation has firmed as favourable base effects fade but remains benign and below the Monetary Policy Committee's 4% target. More importantly, core inflation excluding precious metals has stayed subdued below 2%, even under the new CPI series.

Rupee weakness warrants attention, but we believe the RBI is unlikely to use an interest rate hike to defend the exchange rate. Instead, it has relied on regulatory measures. When external shocks such as high oil prices threaten to widen the current account deficit, a higher interest rate does little to ease exchange rate pressure. Against this backdrop, we believe the Monetary Policy Committee can afford to maintain a neutral stance for now, buying time to assess how the situation evolves amid ongoing West Asia uncertainty. We expect the policy rate to be kept unchanged at 5.25% at the April meeting.

 

DEEPAK AGRAWAL, CHIEF INVESTMENT OFFICER – DEBT, KOTAK MUTUAL FUND
As the RBI's April monetary policy approaches, macroeconomic complexities have intensified dramatically. The West Asia conflict has sharply elevated crude oil prices—up 48% since early March--triggering rupee depreciation of around 3% and widening the government securities-US Treasury yield spread to 275 bps.

 

While headline inflation at 3.21% remains within the 4% target and GDP growth holds steady at 7.8%, supply-side pressures from energy costs pose durability risks. Capital flows to emerging markets have turned cautious, pressuring current accounts and financial stability. Against this backdrop, the MPC likely faces a status quo decision, maintaining the 5.25% repo rate and neutral stance while preserving flexibility to respond should external pressures intensify further.

 

ICICI BANK

The Monetary Policy Committee is likely to maintain status quo in April. Policy tone is likely to be nuanced, balancing the impact on both growth and inflation. Future course is to be determined by the magnitude of impact on each variable.

 

The path forward for RBI would depend upon how the conflict impacts growth and inflation; more importantly, what are the second-order and third-order impacts of the conflict. The policy framework has to be balanced and take into account the bottlenecks and the impact of the same.

 

From a policy standpoint, in the April policy, RBI's growth and inflation projections and emphasis on how it sees the impact on the economy becomes important for the future course of policy making. Given that growth will be impacted, it will have to take into account steps that will minimise the impact of the conflict on borrowers.

 

Given that core inflation, excluding gold and silver jewelry, was below 2?fore the conflict, RBI has room to wait and watch and see through the one-time shock. If the shock feeds and leads to second-order inflationary impact, then the RBI would have to consider measures to bring inflation back to target.  End

 

US$1 = INR 93.06

 

Compiled by Shubham Rana

Edited by Tanima Banerjee

 

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