Mumbai: The Reserve Bank on Wednesday expectedly kept interest rates unchanged amid hopes of a global recovery on the back of ceasefire in the six-week-long US/Israel-Iran conflict. The policy decision comes as a month and a-half-long West Asia conflict has disrupted energy supplies, shot up crude oil prices and created fiscal and inflationary pressures for import-dependent nations like India.

This is the first monetary policy review after the government announced a fresh inflation target for the RBI last month. The government has asked the RBI to maintain retail inflation at 4 per cent with a margin of 2 per cent on either side for another five years ending March 2031. Announcing the first bi-monthly monetary policy for the current fiscal, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has unanimously decided to retain short-term lending rate or repo rate at 5.25 per cent with a neutral stance.

The rate cut pause comes on the back of the consumer price index (CPI) based headline retail inflation that moved closer to the RBI’s medium-term target of 4 per cent at 3.21 per cent in February.

Additionally, the rupee has depreciated by over 4 per cent since the war, which has consequences for pushing up import inflation. However, the rupee has appreciated by 50 paise to 92.56 against US dollar following announcement of the ceasefire by the US and Iran. Based on the recommendation of the MPC, the RBI reduced the repo rate by 25 bps each in February, April, and December 2025 and 50 basis points in June amidst easing retail inflation. India’s retail inflation dropped to a historic low of 0.25 per cent in October 2025, marking the lowest level since the Consumer Price Index (CPI) series was introduced.

However, the rupee declined to historic low and crossed 95 against a dollar last month making imports costlier, raising fears of rise in inflation. Rupee touched a record low of 95.21 on March 30, 2026.

Mumbai

TheReserve Bank of India (RBI) on Wednesday projected India’s GDP growth at 6.9 per cent for FY27, lower than the estimated 7.6 per cent for FY26, citing elevated commodity prices and supply chain disruptions stemming from the West Asia crisis.

Unveiling the first bi-monthly monetary policy, RBI Governor Sanjay Malhotra said merchandise exports could be hit by disruptions in key shipping routes and rising freight and insurance costs. However, domestic demand is expected to remain supported by strong services sector momentum, GST rationalisation, rising manufacturing capacity utilisation, and healthy corporate and banking sector balance sheets.

“India’s macroeconomic fundamentals exuded confidence with buoyant growth and low inflation, though conditions turned adverse in March due to intensifying geopolitical tensions,” he said. The RBI noted that higher input costs due to energy prices, along with supply chain constraints, could weigh on growth. Still, government measures to support exports and stabilise supply chains may cushion the impact. The Monetary Policy Committee (MPC) flagged downside risks to growth amid uncertainty over the intensity and duration of the West Asia conflict. For FY27, quarterly GDP growth is projected at 6.8 per cent (Q1), 6.7 per cent (Q2), 7 per cent (Q3), and 7.2 per cent (Q4).

On inflation, the RBI projected retail inflation at 4.6 per cent for FY27, within the target band of 4 per cent (+/- 2 per cent). Quarterly projections stand at 4 per cent (Q1), 4.4 per cent (Q2), 5.2 per cent (Q3), and 4.7 per cent (Q4). The MPC observed that inflation remains below target but warned of upside risks from rising energy prices and potential weather-related food price shocks. Core inflation remains muted, though supply disruptions could create uncertainty.