4 min readApr 9, 2026 06:11 AM IST
First published on: Apr 9, 2026 at 06:11 AM IST
Given the uncertain global scenario, the Monetary Policy Committee maintained a status quo on policy interest rate and kept the stance at neutral. Alongside this, the RBI lowered its GDP growth projection and increased the inflation forecast for 2026-27. The central bank has aptly chosen a wait-and-watch approach amidst the global crisis.
Even in case of early resolution of the conflict, global crude oil prices are expected to remain high, given the supply damage and lingering uncertainties. In midst of higher energy prices and supply concerns, the RBI has lowered the GDP growth projection to 6.9 per cent for FY27 compared to an estimated 7.6 per cent for FY26. It has highlighted that there are downside risks to growth given the uncertainty related to the West Asia crisis. Our GDP growth projection for FY27 is lower at 6.7 per cent, assuming Brent crude oil to average $90/bbl.
There will be upward pressures on inflation, not just from higher energy prices, but also the second-round impact of higher input prices for the industrial sector. Chances of weather-related disruptions also pose a risk for food inflation. The RBI has raised the CPI projection for FY27 to 4.6 per cent, in line with our expectations. While there are upside risks to inflation, the impact of higher global crude oil prices on CPI inflation will somewhat be mitigated by sharing of the burden between the government, Oil Marketing Companies and households. It is important to note that the RBI expects core inflation to remain relatively lower. This shows that demand side inflation will remain benign.
The situation in West Asia could push up India’s import bill. And as around 15 per cent of India’s merchandise exports go to the region, exports will also feel some pain. Remittances will also remain vulnerable, as the Gulf Cooperation Council countries account for nearly 38 per cent of India’s total remittance flows. Overall, we estimate India’s current account deficit to be 2.1 per cent of GDP in FY27 (versus our pre-conflict projection of around 1 per cent).
India recorded FII outflows of $16.5 billion in FY26. While we expect some improvement in flows as the West Asia war situation stabilises, overall flows will remain volatile. FDI net inflows remain weak at $1.7 billion in the first 10 months of FY26. With the current account deficit likely to widen, and capital flows remaining weak, the balance of payments will move to negative territory. However, the rupee has already weakened quite sharply and with early resolution of the war, we expect it to average 92-93 in FY27. The RBI is expected to intervene to contain any sharp weakening in the currency.
While a ceasefire has been announced, a lot will depend on how the conflict situation settles down and the time taken for restoration of supply bottlenecks. Global energy prices will moderate from the current high levels but are still likely to average at a high of $85-90/bbl. Going forward, we expect the RBI to maintain the status quo on interest rates. While there are upside risks to inflation, the impact of higher crude oil prices on CPI inflation will somewhat be mitigated by sharing of the burden between government, OMCs and households. Given the growth concerns, the central bank will not be in a hurry to reverse the rate cycle.
The writer is chief economist, CareEdge Ratings
Even in case of early resolution of the conflict, global crude oil prices are expected to remain high, given the supply damage and lingering uncertainties. 
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