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Geopolitics · India · Interest Rates · RBI
The Reserve Bank of India's Monetary Policy Committee unanimously maintained its key repo rate at 5.25% on April 8, 2026, as it assesses the escalating geopolitical uncertainties from the Iran war and its potential impact on India's economic growth and inflation outlook.
RBI Governor Sanjay Malhotra stated the panel chose to "wait and watch" due to rising risks to growth and inflation from the Middle East crisis. All six MPC members voted to hold rates and continue a "neutral" stance, aligning with 69 of 71 economists in a Reuters poll.
Malhotra noted that while inflation remains in check, upside risks from oil price increases and potential second-round effects render the outlook uncertain. High-frequency indicators show India's economy is strong, but higher oil prices and shortages of key inputs like gas will dampen this momentum, potentially turning a supply shock into a demand shock.
The RBI forecasts GDP growth to slow to 6.9% in 2026-27 from an expected 7.6% in 2025-26, with average inflation projected at 4.6%, within the 2-6% target band. Core inflation is seen at 4.4% for the current financial year.
World oil prices fell after US President Donald Trump announced a two-week ceasefire with Iran, but remain elevated compared to previous months.
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