Reserve Bank of India's Monetary Policy Committee keeps repo rate unchanged at 5.25%

The Reserve Bank of India's six-member Monetary Policy Committee (MPC), headed by Governor Sanjay Malhotra, unanimously decided to keep the repo rate unchanged at 5.25% for the second straight meeting on Wednesday, April 8, and maintained its neutral policy stance.

The policy decision comes as conflict in West Asia disrupted energy supplies, causing a sharp jump in crude oil prices and creating fiscal and inflationary pressures for import-dependent nations like India.

"The outbreak of the conflict in West Asia has led to severe disruption of global supply chains. This poses an unprecedented challenge for the global economy – higher prices and lower global growth. In this environment, monetary policy faces a difficult trade-off – anchoring inflation expectations through policy tightening while minimising its impact on growth forgone," MPC said in the policy statement.

The MPC raised India's real gross domestic product (GDP) forecast for the financial year 2026 to 7.6% from its earlier growth forecast of 7.4%.

For the current financial year, however, Governor Malhotra predicted a GDP growth forecast of 6.9%. The forecast for the first quarter of the current fiscal was slashed to 6.8% from its earlier projection of 6.9% amid geopolitical tensions in West Asia.

"Elevated energy and other commodity prices, coupled with supply shock due to disruptions in the Strait of Hormuz, would act as a drag on domestic production in 2026-27. Heightened volatility in global financial markets, with its spill over on domestic financial conditions, would weigh on growth prospects," the MPC statement said.

CPI projections

The consumer price index (CPI) based inflation for the current financial year was pegged above its upward tolerance limit of 4% at 4.6%. The RBI expects CPI inflation in the first quarter of FY27 at 4%, Q2 is expected at 4.4%, the third quarter inflation is expected to come in at 5.2%, and the fourth quarter 4.7%.

“The ongoing conflict has led to large volatility in international energy and other commodity prices, imparting considerable uncertainty to the near-term inflation outlook. The pass-through of higher global energy prices has resulted in price increases in select fuels such as premium petrol, LPG, and diesel for industrial use. On the other hand, the near-term food supply prospects have been boosted by a robust rabi crop, providing some comfort,” MPC said on inflation forecast.

Rupee fall: What the Guv said

Commenting on the rupee’s sharp depreciation against the US dollar, Governor Malhotra said that intervention in the foreign exchange market is aimed at smoothing excessive and disruptive volatility, without targeting any specific level band of price for the exchange rate.

"The Indian rupee in the last financial year depreciated more than the average in the previous years. In this regard, let me reiterate. I've said it many times. Our exchange rate policy remains unchanged, specifically. Intervention in the foreign exchange market is aimed at smoothing excessive and disruptive volatility, without targeting any specific level or band of price for the exchange rate. This is consistent with our long-standing policy of exchange rates being market-determined,” the governor said.

“And we in the RBI stand committed to this policy and would judiciously continue to contain excessive or disruptive volatility to ensure that self-fulfilling expectations do not exacerbate currency movements beyond what is warranted by fundamentals," Governor Malhotra added.