RBI Keeps Repo Rate at 5.25% in April Policy; Growth Seen at 6.9% for 2026-27

The Monetary Policy Committee (MPC) met on April 6-8 to deliberate and decide on the policy repo rate. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC voted unanimously to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged. In its April meeting of the Monetary Policy Committee (MPC), the Reserve Bank of India (RBI) has maintained the repo rate at 5.25%. This marks a continuation of the pause in rate changes.

The rate for the standing deposit facility (SDF) stays at 5.00%. The Bank Rate and the marginal standing facility (MSF) rate stay at 5.50%. The MPC also maintained its neutral stance. This shows a cautious approach while balancing strong domestic fundamentals with rising global uncertainties.

Global growth faces increasing downside risks as the sharp rise in energy prices and shortages of inputs for various industries have stoked inflation fears and pushed up the geopolitical risk premium in oil markets. Heightened uncertainty precipitated by the ongoing conflict is weighing on the outlook. Safe-haven flows have exerted depreciation pressure on currencies of major economies as the US dollar has strengthened. While commodity prices, such as of metal and gold, have moderated, financial markets have become more volatile. Equities registered a broad-based correction.

The Government has taken several measures targeted at supporting exports and protecting supply chains. This should mitigate the adverse impact of the conflict. The MPC opined that the intensity and the duration of the conflict and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks.

Governor Malhotra noted that growth momentum was strong before March. However, external shocks now pose risks to growth and may add pressure on inflation, even as headline figures remain below target. The central bank is watching the situation closely and will act as needed to maintain stability.

GDP Growth & Outlook

RBI’s Governor, Sanjay Malhotra, said that India’s economy did well in 2025-26. Real GDP growth is estimated to be 7.6% year-on-year, as per the Second Advance Estimates (SAE) of the new GDP series (base year 2022-23). Strong private consumption, fixed investments, and support from the services and manufacturing sectors contributed significantly to the growth. Real GVA growth came in at 7.7%.

Moving ahead, RBI highlighted that GDP is expected to moderate in the next financial year.

For 2026-27, growth is expected to slightly slow down. That said, the RBI has projected GDP growth at 6.9% for 2026-27.

Quarterly estimates show Q1 2026-27 at 6.8%, slightly lower than the earlier 6.9%. Q2 2026-27 is at 6.7%, revised down from 7%. Q3 and Q4 2026-27 are expected to pick up and report 7.0% and 7.2%, respectively.

The downward revision in the first half reflects rising global risks. The conflict in West Asia is a key concern that has led to disruptions in the Strait of Hormuz. This affected crude oil prices and key trade routes.

Higher energy and commodity prices may also hurt domestic production. Exports could be affected if the conflict continues for a long time. Global financial market volatility may also spill over into India.

Inflation Trends

On inflation, the situation is under control for now. Headline CPI rose to 3.2% in February 2026 from 2.7% in January. This increase was mainly due to base effects.

Food inflation increased slightly. Food price outlook remains comfortable in the near term with robust rabi production, adequate reservoir levels and comfortable buffer stocks of foodgrains.

Core inflation, which excludes food and fuel, remained stable. Excluding precious metals, core inflation stayed around 2.1%. This shows that underlying inflation is still moderate.

For 2026-27, CPI inflation is projected at 4.6%. The quarterly trend is:

• Q1: 4.0%
• Q2: 4.4%
• Q3: 5.2%
• Q4: 4.7%

Core inflation is expected at 4.4% for the year. It is lower if precious metals are excluded.

However, risks to inflation are rising. High energy prices from West Asia and possible El Niño effects on the southwest monsoon could push prices higher. Domestic factors such as GST rationalisation, rising manufacturing capacity, healthy corporate balance sheets, and strong services growth may ease the pressure. Going forward, elevated energy and other commodity prices, as also shocks to availability of inputs due to disruptions in the Strait of Hormuz are likely to impact growth in 2026-27. The Government has, however, been proactive in ensuring supply of inputs across critical sectors to minimise the impact of supply chain disruptions.

RBI’s Overall View

The RBI said geopolitical uncertainty has increased since the last policy. Inflation is still below target, but risks are now on the upside.

Overall, the RBI has chosen to stay cautious. Growth remains steady, but risks are building. The central bank will keep a close watch and act if needed to maintain stability.

References:

https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR37F51ECB4682364FFBB7BC60382CE58007.PDF

https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR36179ED854C2504530A4E69A95E76CF144.PDF