Inflation has stayed below the RBI’s medium-term target of 4% for a year and economic growth remains strong but the U.S.-Israel war with Iran has blocked a key transport corridor and threatens price stability for the world’s third-largest oil importer.
Still, all but two of 71 economists in the March 23-26 Reuters poll expected the RBI to keep the repo rate unchanged at 5.25% at its next policy meeting.
Most see rates on hold at least until mid-2027, a view largely unchanged from a February survey, before the war began.
“Inflation is already quite benign. So there is some space for oil price shocks to get absorbed into higher inflation without really rocking the boat of the economy…but the risks are clearly to the upside for the policy rate,” said Dhiraj Nim, an economist at ANZ.
‘PREMATURE TO CONSIDER RATE INCREASE’
Sakshi Gupta, principal economist at HDFC Bank, agreed, adding “it is premature to be considering a rate increase.”
Most economists said the RBI is unlikely to deviate from the neutral stance it has maintained since June given the uncertainty around how long the conflict will persist. Inflation and growth projections have largely remained unchanged. Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership, said given the war, “it is important the RBI also doesn’t sound complacent or dovish in this context and is mindful of the inflation risk.”
The survey showed inflation averaging 4.3% over the next two fiscal years, broadly unchanged from the February poll. Economic growth was forecast to average around 7.0%.
Asked about the biggest risk facing the Indian economy in fiscal 2026-27, a strong majority, 30 of 37, cited a combination of low growth and high inflation.