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Informist, Wednesday, Apr. 8, 2026

 

MUMBAI - Indranil Pan, Chief Economist at YES Bank, said the following on the Reserve Bank of India's first bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Wednesday:

 

From this policy, more than expecting any changes in the rates or the stance, the markets were keenly watching the RBI's forecasts for growth and inflation, as well as its communication during such uncertain times. RBI projected growth at 6.9% and inflation at 4.6% for FY27, while clearly alluding to upside risks to inflation and downside risks to growth.

 

Importantly, the RBI has assumed a normal monsoon for FY27, though we read reports of a heightened risk for El Nino that would depress monsoon rains in the upcoming South West monsoon season for India. Given the inflation trajectory drawn out by the RBI over the quarters of FY27 and hoping that there are no significant downsides to the growth, the chances of any incremental rate cuts have moved close to zero.

 

Rate hikes are also probably some distance away and through FY27 the RBI would probably have to strike the very delicate policy trade-off of keeping inflation pressures in check yet supporting growth. While it is difficult immediately to indicate if the war (between the US and Iran) shock is permanent or transitory, particularly given the two-week ceasefire announced, near-term impact of supply chain disruptions has been well handled by the government as it largely absorbs the cost of higher global crude oil (prices). For now, we think that H1FY27 (Apr-Sept) should not see any tightening of monetary policy while we keep open the chance of a tightening if the war situation persists and domestic inflation is seen getting more entrenched, as might be indicated by the household inflation expectations survey.  End

 

Compiled by Meera Nair

Filed by Deepshikha Bhardwaj

 

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