Despite the rapidly changing geopolitical environment, economists said on Friday that they don’t anticipate the Reserve Bank of India’s (RBI) monetary policy committee to be in any hurry to restrict policy.
Last month, RBI Governor Sanjay Malhotra stated that Central Bank is keeping a close eye on the repercussions of the West Asia war and would not commit to a specific course for future policy rates.
He made it clear that the central bank was not in a hurry to change interest rates. He said that we are in a wait-and-see mode.
In contrast to a mild 2. 1% in FY26, India’s April inflation is predicted to increase to 3. 9% YoY from 3. 4% the previous month, approaching the center of the target range, according to Radhika Rao, Senior Economist and Executive Director at DBS Bank, India.
Food inflation is predicted to have increased from 3. 7% to 4. 5%, reversing last year’s sluggish trend, as a result of chosen perishable items like tomatoes, eggs, cereals, and edible oils, as well as sporadic rains in certain areas, which made the problem worse.
However, aided by a decline in precious metal prices, core inflation is predicted to be steady and moderate at 3. 4%. “Transport inflation due to ATF prices and services in the restaurant and hospitality industry should also capture indications of an updrift (commercial cooking gas price adjustments),” said Rao.
As pump fuel prices remain constant, the overall effect of rising world oil prices has not yet trickled down to retail inflation. El Nino trends and their influence on monsoon strength will also be monitored by markets.
The economist said that the impact of rising commodity prices and a weak rupee on imported costs is likely to be more evident in the WPI index, which had already surpassed retail inflation in March and is predicted to continue the upward trend in April as well.
With a neutral approach, the RBI maintained the repo rate at 5. 25% during its April meeting. Assocham had applauded the measured action taken to improve the macroeconomic environment’s stability, noting that it supports growth momentum and maintains price stability.
As the RBI has also identified El Nino as a risk to inflation and predicted GDP growth of 6. 9% and inflation of 4. 6%, Madan Sabnavis, Chief Economist at the Bank of Baroda, noted a lower possibility of additional rate reductions.