The Reserve Bank of India (RBI) has chosen to wait and watch rather than make tangible changes to its key policy tools amid the ongoing West Asia conflict. The RBI's projections for growth and inflation suggest that the Indian economy has gone from a low-inflation and high-growth environment to potential stagflation.
The RBI now expects the Indian economy to grow at 6.9% in 2026-27 with risks tilted to the downside, which is the lowest and first sub-7% growth in the current GDP series. Inflation projection for 2026-27 stands at 4.6% with risks tilted to the upside.
The RBI has left the policy rate and monetary policy stance unchanged at 5.25% and neutral, respectively. The Monetary Policy Report projects a 6.6% GDP growth for 2027-28 assuming crude oil at $75/barrel.
Experts believe that future conditions, especially the price of crude oil, would be critical in whether or not RBI increases interest rates going forward. The RBI has also underlined the fact that Indian economy can deal with these disruptions, citing its stronger fundamentals.
