RBI MPC Minutes 2026: Repo held 5% on West Asia risks

What the April 2026 MPC decision signals

The Reserve Bank of India’s Monetary Policy Committee (MPC) kept its benchmark repo rate unchanged at 5% on April 8, opting for a wait-and-see stance as the West Asia conflict raised uncertainty around energy supplies, inflation, and growth. The decision was unanimous, according to the minutes released on April 22. RBI Governor Sanjay Malhotra, who chairs the six-member MPC, said the conflict represents a supply shock with multiple transmission channels into the Indian economy. The RBI maintained a neutral policy stance. Policymakers highlighted that while underlying inflation pressures, excluding the shock, remain contained, the persistence of disruption could make inflation expectations harder to manage without sacrificing growth.

Why West Asia is central to India’s risk map

The minutes describe “severe disruption of global supply chains” as a core macro concern, combining higher prices with weaker global growth. Malhotra said the conflict affects India through exports, supplies of critical commodities, elevated energy and other commodity prices, remittances, heightened uncertainty, and subdued global demand. The disruptions have also weakened trade flows and put pressure on the rupee, according to the governor’s assessment in the minutes. The evolving nature of the conflict over the past month was cited as a key reason the MPC did not commit to a fixed rate trajectory.

Strait of Hormuz disruptions and the energy channel

A focal point in the minutes is the Strait of Hormuz, described as a critical shipping route accounting for roughly half of India’s energy imports. Members said disruptions in logistics have contributed to a sharp rise in international energy prices and impeded global trade flows. The committee noted that elevated energy and commodity prices, along with supply shocks linked to Hormuz disruptions, are expected to drag on domestic production in 2026-27. The minutes also flag that a prolonged conflict could push freight and insurance costs higher, potentially weighing on merchandise exports and trade volumes.

Inflation risks: input costs, expectations, and weather

MPC member Indranil Bhattacharyya said inflation risks have increased in the wake of the conflict, with global logistics disruption making prices more sensitive to geopolitical developments. He noted that the direct impact of higher global energy prices has so far been muted because retail fuel prices have remained unchanged, but higher input costs could gradually feed into inflation. He said headline inflation was within target during the first two months of 2026 under the new CPI series, while core inflation stayed contained. However, he cautioned that core inflation could pick up gradually as input cost pressures transmit through the economy.

Bhattacharyya also pointed to preliminary forecasts by private meteorological organisations suggesting hotter summers and the likely onset of El Niño. He described inflation expectations as “more worrying” and said India’s balance of payments and trade were likely to be affected. He added that monetary policy has limited near-term effectiveness against supply-driven inflation, becoming more relevant if second-round effects such as wage pressures or unanchored expectations begin to appear. At the time of the minutes, he said there was no clear evidence of such second-round effects.

Growth outlook: “cautiously positive” but with downside risks

Malhotra described the outlook for 2026-27 as “cautiously positive,” supported by services, agriculture, and healthy balance sheets. He said private consumption and investment were expected to remain resilient, helped by improving rural demand, sustained public spending, and a pickup in private capex. Services exports and recent trade agreements were also cited as supportive factors.

At the same time, the governor warned that supply-chain disruptions may take time to fully subside, posing downside risks to growth and upside risks to inflation. MPC members also discussed how disruptions in crucial shipping routes could hurt global demand and Indian exports, tightening the growth-inflation trade-off.

Members’ views: a supply shock with a tougher trade-off

External member Ram Singh cautioned that the conflict could shift India’s growth-inflation trade-off away from a “Goldilocks” state seen in February 2026. He said there was a case for a dovish pause and estimated the growth cost of the West Asia conflict so far at 50-60 basis points, widening the output gap. Singh highlighted that turmoil in the Strait of Hormuz hampers growth through oil supply disruptions and their impact on demand, alongside disruption in shipping routes.

MPC member Nagesh Kumar said the conflict has significantly clouded the global economic outlook and is likely to affect India’s 2026-27 prospects. He warned that with weak global growth affecting exports and crude prices pushing up the import bill, the current account deficit, which has stayed in a “comfortable range” of 1.5% of GDP in the past, is likely to worsen. He argued prudence requires a status quo on monetary policy while closely monitoring West Asia developments.

Key numbers and signals from the minutes

Market and real-economy channels highlighted by MPC

The minutes outline several direct and indirect channels through which the conflict can affect domestic conditions. Higher crude and commodity prices can lift production costs and widen the import bill, while logistics disruptions can raise freight and insurance costs, depressing trade flows. The minutes also note potential pressure on remittances and capital flows amid global uncertainty. For domestic activity, elevated energy and commodity costs are expected to act as a drag on production in 2026-27.

MPC commentary also points to sector-level stress. One member noted that MSMEs are particularly impacted due to rising input costs and limited financial capacity, implying that cost shocks may be unevenly distributed across the economy.

Why the RBI is avoiding forward guidance

Malhotra said the shock is primarily supply-driven, and that the challenge becomes harder if the conflict remains unresolved for a long duration. In that case, central banks may struggle to rein in inflation expectations while minimising growth sacrifice. Against that backdrop, the RBI has avoided committing to a predetermined interest-rate path and kept policy decisions data-driven, with continuous reassessment of risks.

What to watch next

The MPC minutes repeatedly link future inflation and growth outcomes to the duration and scale of disruptions in West Asia and the speed of supply-chain normalisation. Key variables to monitor include global energy prices, shipping and insurance costs through key routes such as the Strait of Hormuz, and any signs that higher input costs are translating into broader inflation expectations. The central bank’s next steps will depend on incoming data on inflation, growth, and external balances, alongside developments in the conflict.