Kamal Ghorui
The Reserve Bank is expected to keep the benchmark repo rate unchanged at 5.25% in its April monetary policy review, as rising inflation risks linked to the Middle East crisis cloud the outlook, according to a poll of economists cited by PTI.Geopolitical tensions, volatile commodity prices and sharp currency movements — with the rupee hitting record lows — have complicated the policy trajectory, with economists closely watching the central bank’s projections on growth, inflation and policy stance.“Given the uncertainty around crude oil prices and geopolitical developments, the RBI is likely to remain on pause in the April policy and closely monitor incoming inflation data before taking any further action,” said Aditi Nayar, Chief Economist at ICRA, PTI quoted.SBI’s chief economist Soumya Kanti Ghosh said the central bank will be cautious in communicating its decision. “India is not unscathed from the current crisis and is feeling the mercury rising. Rupee is already hovering above 93 per dollar, and crude oil is adamant above USD 100 per barrel, resulting in a jump in imported inflation across states,” he said, adding that the projected “super El Nino” will also put pressure on inflation.Dipti Deshpande, principal economist at Crisil, said under the base case scenario where inflation remains close to the MPC’s target, the central bank may look through the supply shock and keep rates unchanged.The RBI has already cut the repo rate by 1.25% since last February, but has maintained status quo in its August, October and February 2026 policy reviews.The six-member Monetary Policy Committee is scheduled to begin its April meeting on Monday, with the final decision expected on Wednesday.Economists noted that although retail inflation has eased closer to the RBI’s medium-term target of 4%, the recent spike in crude oil prices has raised concerns over second-round effects on domestic prices, especially in fuel, transport and core inflation components.Estimates suggest that every USD 10 per barrel increase in crude prices could push inflation up by as much as 0.60%. Crude prices have surged from around USD 60 per barrel to over USD 100 since the conflict began in late February. The rupee has also weakened by more than 4% during this period, adding to imported inflation pressures.“We do not expect any change in repo rate or stance this time. The tone will be cautious, and what will be eagerly awaited is the RBI’s forecast of GDP and inflation under the prevailing uncertainty,” said Bank of Baroda chief economist Madan Sabnavis.HDFC Bank principal economist Sakshi Gupta said a rate move based on short-term developments may not be prudent given ongoing volatility in global commodity markets. “The central bank would prefer to wait for clearer signals on the inflation trajectory,” she said.Economists indicated that the RBI may revisit its inflation and growth projections in the upcoming review to reflect evolving global risks, with a possibility of upward revision in inflation forecasts if crude prices remain elevated.Given the current scenario, the policy focus is expected to shift towards inflation management rather than growth support.“While domestic growth conditions remain supportive, the persistence of global uncertainties could weigh on exports and investment activity, requiring the RBI to maintain policy flexibility,” said a treasury official at a private sector bank.The central bank is also likely to retain its neutral stance, signalling flexibility amid uncertain inflation dynamics and global developments. Liquidity conditions, transmission of past rate changes, financial market stability, currency movements, capital flows and bond market dynamics are expected to remain key considerations for policymakers.
