Mumbai, April 5: The Reserve Bank is likely to keep the benchmark policy repo rate unchanged at 5.25 per cent in the April monetary policy review meeting, as the West Asia crisis is likely to push up inflation, according to economists.
The continuing geopolitical tensions in West Asia, volatility in commodity prices and sharp currency movement that have seen the rupee hit record lows have complicated the policy outlook, and its projections on growth, inflation and also the stance of policy will be keenly watched, the poll of over a dozen economists said.
“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.
SBI’s chief economist Soumya Kanti Ghosh said while announcing the pause, the RBI will be careful 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,” Ghosh said, adding that the projected “super El Nino” will also put pressure on inflation.
Dipti Deshpande, principal economist, Crisil, said under the base case expectation that inflation stays close to the MPC’s target, the monetary policy may look through this supply shock and will keep rates on hold.
The central bank has so far reduced the repo rate by 1.25 per cent since last February, as the cool down in inflation offered it the space to work towards further boosting growth. However, the central bank kept the rate unchanged in the August, October and February 2026 monetary policies.
The six-member monetary policy committee is scheduled to start its April policy review meeting on Monday, and the final vote on one of the most challenging policy reviews will happen on Wednesday.
Economists noted that while retail inflation has moved closer to the RBI’s medium-term target of 4 per cent, the recent surge in global crude oil prices has raised concerns about potential second-round effects on domestic prices, particularly fuel, transportation, and core inflation components.
As per estimates, every USD 10 increase in crude prices per barrel stokes inflation by up to 0.60 per cent. (PTI)
