RBI policy carefully balances growth and inflation control: Somil Mehta

The Reserve Bank of India (RBI) has taken a cautious and balanced approach in its April 2026 monetary policy. The Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 5.25 per cent, while the Marginal Standing Facility (MSF) and Standing Deposit Facility (SDF) remain at 5.5 per cent and 5 per cent respectively. The policy stance continues to remain neutral, indicating that the RBI is carefully watching both inflation and growth before making further decisions.

 

One of the key highlights of this policy is the RBI’s focus on global uncertainties. The ongoing geopolitical tensions in West Asia have led to a sharp rise in energy prices and supply chain disruptions. This has increased the risk of inflation going higher. The RBI has projected consumer price index (CPI) inflation at 4.6 per cent for FY27, with core inflation expected around 4.4 per cent. Inflation estimates for the coming quarters have also been revised upwards, reflecting the impact of rising oil and commodity prices.

 

In addition to global factors, there are concerns on the domestic front as well. The RBI has warned that possible El-Nino-like conditions could impact food production and push food inflation higher. This adds another layer of uncertainty to the inflation outlook.

 

On the growth side, the RBI has maintained a positive outlook, projecting gross domestic product (GDP) growth at 6.9 per cent for FY27. However, near-term growth estimates for the first two quarters have been slightly reduced. This reflects caution due to global slowdown concerns and weaker external demand. While merchandise exports may face pressure, services exports are expected to remain strong, supported by India’s competitive advantage and recent trade agreements.  ALSO READ | RBI repo rate at 5.25%: Save up to Rs 14 lakh on Rs 75 lakh home loan EMI 

 

A major positive from the policy is the RBI’s commitment to proactive liquidity management. The central bank has assured that it will ensure sufficient liquidity in the system to support economic growth. This is important for maintaining stable credit flow to businesses and consumers.

 

The RBI has also introduced some regulatory measures that are positive for the financial sector. Easing certain conditions related to capital adequacy and removing the requirement of investment fluctuation reserves will help banks improve their capital position and support lending. Additionally, steps taken to simplify regulations and support the MSME sector are expected to improve ease of doing business and encourage economic activity.

 

Overall, the RBI’s policy reflects a careful balance between controlling inflation and supporting growth. At a time when global risks are rising, the central bank has chosen to remain flexible and proactive. This approach ensures that India’s economy remains stable while being prepared to handle external shocks.

 

In conclusion, the policy sends a clear message that while challenges exist, India’s economic fundamentals remain strong. The RBI’s focus on liquidity, growth support, and inflation control provides confidence that the economy is well-positioned to navigate uncertain global conditions.

 

(Disclaimer: This article is by Somil Mehta, head of retail research,Mirae Asset ShareKhan. Views expressed are his own.)