RBI expected to prioritise inflation control over growth push

The Reserve Bank of India (RBI) is widely expected to keep its benchmark repo rate unchanged at 5.25 per cent in the upcoming April monetary policy review, as policymakers grapple with rising global uncertainties and inflation risks. Economists indicate that escalating tensions in West Asia , coupled with surging crude oil prices and a weakening rupee, have complicated the central bank’s policy outlook.

The six-member Monetary Policy Committee (MPC), which begins deliberations on Monday, is likely to adopt a cautious and watchful stance , prioritising inflation management over aggressive growth support. Analysts note that crude oil prices hovering above USD 100 per barrel and the rupee’s depreciation beyond ₹93 against the US dollar are fuelling imported inflation , particularly in fuel, transportation and core sectors. Estimates suggest that every USD 10 increase in crude prices could push inflation higher by up to 0.60 percentage points.

Despite retail inflation easing closer to the RBI’s medium-term target of 4 per cent , risks remain elevated due to volatile commodity prices and potential weather-related disruptions such as a super El Niño , which may impact food prices. In this backdrop, economists expect the central bank to maintain its neutral policy stance , allowing flexibility to respond to evolving global and domestic conditions.

The RBI has already reduced the repo rate by 1.25 percentage points since last year to support growth, but has held rates steady in its recent policy reviews, signalling a shift towards consolidation. Experts believe the upcoming policy may also see upward revisions in inflation forecasts , reflecting persistent external pressures.

As India’s central bank, the RBI plays a critical role in inflation management through interest rate adjustments, liquidity control, and monetary signalling . Its policies have been largely effective in anchoring inflation expectations in recent years, particularly by steering inflation closer to its 4 per cent target band after periods of volatility. However, economists caution that external shocks such as geopolitical conflicts and commodity price spikes often limit the immediate effectiveness of monetary policy , requiring a calibrated and patient approach.

With global uncertainties persisting, the RBI is expected to emphasise policy flexibility, financial stability, and close monitoring of currency movements and capital flows , while ensuring that inflation remains within manageable levels without derailing economic growth.