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Informist, Wednesday, Apr. 8, 2026

 

MUMBAI - Miguel Chanco, chief emerging Asia economist, Pantheon Macroeconomics, said the following on the Reserve Bank of India's first bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Wednesday:

 

The vote to keep the benchmark rate unchanged was unanimous, as seemingly was the decision to retain the RBI's official stance at "neutral", a small change from February when one of the six members was still calling for a shift to "accommodative". A lot has changed globally since the Monetary Policy Committee last met in early February, but much has also developed since this month's meeting started on Monday.

 

The Monetary Policy Committee called the war in West Asia an "unprecedented challenge for the global economy — higher prices and lower global growth", but the two-week ceasefire announced by the warring parties overnight should help minimise some of the "key downside risks" the members highlighted, including "further intensification of the conflict" and "its prolongation".

 

The committee remains broadly optimistic on the economy's growth prospects, while conceding at the same time that the global energy supply shock and disruptions to shipping routes would hit activity if sustained. Members shaded their calendar year Apr-Jun and Jul-Sept GDP growth forecasts only marginally to 6.8% and 6.7%, respectively, from 6.9% and 7.0%, while unveiling projections of 7.0% and 7.2% for Oct-Dec and Jan-Mar, respectively. This largely sounds reasonable to us, as the implied FY27 average is in sync with our own 6.9?ll for this fiscal year.

 

The committee is, rightly, not perturbed about the short-term outlook for inflation either, with the government's implicit pump-price fixes undoubtedly providing some sense of quiet comfort. For Apr-Jun, members still see inflation averaging at 4.0%, while they've raised their September quarter forecast slightly to 4.4% from 4.2%. Meanwhile, they unveiled projections of 5.2% and 4.7% for Oct-Dec and Jan-Mar 2027, respectively, which seem overly pessimistic from our point of view.

 

Overall, we continue to believe that the Monetary Policy Committee will hold the repo rate at 5.25% through to the end of our current forecast horizon to end-2027. It's very reassuring that the committee seems to want to avert a knee-jerk tightening of policy in the wake of the oil shock and also the resultant downward pressure on the rupee, saying emphatically in Wednesday's closing paragraph that "the economy is confronted with a supply shock" and that it is "prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook".  End

 

Compiled by Shubham Rana

Filed by Avishek Dutta

 

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