The RBI’s Monetary Policy Committee voted unanimously to keep the policy repo rate unchanged at 5.25% and retained a neutral policy stance, reflecting a cautious wait-and-watch approach amid uncertainty surrounding the Middle East conflict, energy markets, and global supply chains. To support the rupee and external accounts, the RBI announced a package of measures to attract foreign capital inflows, complemented by the government’s decision to exempt foreign portfolio investors from tax on interest income and capital gains from government securities. Meanwhile, India’s economy remained relatively resilient, with real GDP growth at 7.8% in Q4 FY26 (vs 8% in Q3), supported by private consumption (though moderating from the Q3 pace), stronger investment activity, higher government consumption spending, and a small positive contribution from net exports. The RBI revised its FY27 real GDP growth projection down by 30-bps to 6.6% and raised its CPI inflation forecast by 50-bps to 5.1%, with inflation projected to peak at 5.9% in Q3. Based on the RBI’s revised FY27 inflation projections, we expect cumulative policy rate hikes of 50-75 bps in H2 FY27, depending on the evolution of energy prices and external conditions.
