RBI MPC April 2026: Repo 5.25%, FY27 GDP 6.9%, CPI 4.6%

Policy decision: repo rate held at 5.25%

The Reserve Bank of India’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, kept the policy repo rate unchanged at 5.25% in its April 2026 review. The committee also retained a neutral stance. The decision came as fresh global developments since the previous policy meeting raised concerns around inflation risks, even as the RBI is described as being in an easing cycle. The central bank framed the decision as a balancing act between inflation control and growth support. Economists had widely expected a pause, given heightened uncertainty and commodity price swings. The policy message was clear: the RBI prefers to wait and watch rather than adjust rates amid rapidly changing external conditions.

West Asia conflict and crude oil over $100

A key risk flagged through the policy commentary was the ongoing US-Israel-Iran conflict. The report notes crude oil prices rising to above $100 per barrel, and that a sustained increase could push up India’s import bill. The RBI also pointed to risks from damage to energy and other infrastructure in West Asia, which can affect both inflation and growth outlooks. The central bank highlighted supply chain dependencies around energy, fertiliser and other commodities as channels through which inflation can get transmitted. With volatility in global commodity prices, near-term inflation risks were described as tilted upward. The RBI’s caution reflects the challenge of managing domestic inflation expectations while external shocks remain unresolved.

Inflation framework: target band and the rupee channel

The RBI’s CPI inflation target remains 4%, within a tolerance band of 2% to 6%. With the rupee depreciating and “sharp currency movements” mentioned alongside record lows, the policy discussion emphasised the currency risk channel. The RBI noted that widening current account deficit and capital outflows could lead to currency depreciation in emerging markets, adding inflation pressure through higher import prices. In this backdrop, the case for holding rates was linked to preventing an amplification of currency risks. The report also says inflation risks are not evenly balanced, and that there is an upward risk to inflation, reinforcing the logic of policy stability.

FY27 CPI inflation projected at 4.6%; quarterly path outlined

The MPC projected CPI inflation at 4.6% for FY27, within the target range. Governor Malhotra also gave quarterly projections for FY27 CPI inflation: Q1 at 4.0%, Q2 at 4.4%, Q3 at 5.2% and Q4 at 4.7%. Elsewhere in the report, an updated set of early-quarter revisions is mentioned as well, including Q1 FY27 at 4.0% (from 3.9%) and Q2 FY27 at 4.2% (from 4.0%). The policy narrative also highlighted risks from fuel inflation and food inflation, including weather-related risks. El Niño was cited as a potential weather disruption that could affect inflation dynamics.

Growth outlook: FY27 GDP seen moderating to 6.9%

On growth, the MPC estimated real GDP growth at 6.9% for FY27, a moderation from 7.6% in the previous year. Part of the moderation was attributed to a statistical high-base effect for fiscal 2026. The report adds that FY27 growth is supported by strong domestic demand, services sector momentum and improving manufacturing capacity utilisation, while noting risks from elevated energy prices, trade disruptions and market volatility. Separately, another update in the provided text says the real GDP growth projection for FY26 was increased to 7.6% from 7.4%. The government’s first advance estimates were also cited at 7.4% for FY26.

What drove the “wait and watch” approach

The RBI’s decision was repeatedly framed as prudent in the face of global uncertainty. With inflation risks linked to energy, fertiliser and broader commodity supply chains, the MPC chose policy continuity. The commentary suggests that avoiding premature easing helps anchor inflation expectations, while also preventing a resurgence in price pressures. At the same time, stable policy settings were described as supportive for consumption and private investment because they improve visibility for longer-term financial planning. The RBI also indicated it would keep ample liquidity to support economic activity, though it did not announce an explicit new liquidity measure in the text provided.

New disclosure: core inflation projections added

A notable change mentioned in the report is that the RBI started providing core inflation projections alongside headline inflation projections. This is described as a departure from the earlier approach of only providing headline inflation projections. The stated benefit is greater transparency around MPC decisions, which can support financial stability. The report also notes a policy interpretation: if rate increases were used to counter rising food and fuel prices, it would signal an intent to anchor inflation expectations rather than reduce aggregate demand. While no such hike was delivered, the framing helps explain how the RBI is thinking about the trade-offs during supply-side shocks.

Banking governance: RBI to revise bank board guidelines

Beyond the rate decision, Governor Malhotra said the RBI plans to revise guidelines for bank boards so they focus more on policy matters rather than day-to-day operations. A comprehensive review of instructions is being undertaken following requests from banks, with the goal of better utilisation of bank boards’ time. While this is not a monetary policy lever, it was presented as an important institutional step announced alongside the policy updates.

Key numbers at a glance

Market impact and what investors tracked

The policy pause aligned with expectations that geopolitical tensions and commodity volatility would complicate the inflation outlook. The report highlights that persistent tensions, swings in commodity prices and sharp currency movements have made the policy environment more complex. By holding the repo rate steady, the RBI signalled it is prioritising stability while monitoring the pass-through from global energy prices and currency moves into domestic inflation. The mention of current account deficit risks and capital outflows underscores why currency stability featured prominently in the discussion. Investors also had cues to track on transparency, given the addition of core inflation projections alongside headline numbers.

Conclusion

The April 2026 MPC decision kept the repo rate unchanged at 5.25% with a neutral stance, while projecting FY27 GDP growth at 6.9% and CPI inflation at 4.6%. Governor Sanjay Malhotra highlighted that the intensity and duration of the West Asia conflict and related infrastructure damage add risks to both inflation and growth. With crude oil above $100 per barrel and the rupee under pressure, the RBI’s policy message leaned toward caution and continuity. The next leg of market attention is likely to remain on incoming inflation and growth data, the evolution of energy prices, and the RBI’s follow-through on bank board guideline revisions.