RBI MPC meets on 6th April 2026

First meeting of MPC - FY26-27 

Status quo assumed: Interested in projections 

The 60th bi-monthly review meeting of the Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) and the first one for the current financial year (FY 26-27) begins tomorrow.

Main Points for discussion while reviewing the policy rate: 

1. Even as CPI inflation is on the rise since Dec 25 (2.74 in Jan 26 and 3.21 in Feb 26), the inflation rate continues to be less than the target rate of 4%. CPI inflation is now calculated based on changes in the base year. The GDP growth up to Feb 26 promised a growth rate of above 7% for FY 26. All these factors may not be considered relevant in the current bi-monthly meeting in the backdrop of the on-going war between USA-Israel on the one side and Iran on the other, not on a full scale but caused enough damages already in the Gulf region that hit the world at large as a consequence. Though the positive domestic factors can no longer be taken as indicators for the short-term future, in view of the external developments, (i) the fall of rupee from ₹ 91 levels in Feb 26 to the current ₹ 94 plus level (ii) the decline in Forex reserves by USD 30 billion in the last 40 days to USD 698 billion and (iii) the increase in yield in dated G-Sec by more than 30 bps within a month (it affects the other fixed debt interest rates as well) are bound to occupy most time of the discussions, as they point towards (a) the vulnerability of the BoP position to the inflows/outflows in the capital account and (b) the immediate prospect of imported inflation hurting the CPI inflation in a much bigger way.

2. Since the ongoing war appears to be short-term (likely to taper out by end April barring US President dictates), like other central banks (FED, EU, UK, etc.), RBI MPC in all probability may decide to maintain status quo, both in repo rate and stance. So I do not attempt to go into the rationale of any such 'wait and watch' decision that is likely.

Projections are more important to undertake remedial measures: Whatever be the duration of war from now on, one thing is clear - the CPI inflation will inch up and GDP growth for FY 2026-27 will come down. The projections depend on whether the war is short term or medium term. Since that is not in anyone's hold now, RBI MPC may do well to present two stress scenarios and project CPI inflation/GDP growth in both the scenarios. 

First stress scenario - on the assumption that the war and its supply chain disruptions ceasing before April and  

Second stress scenario on the assumption that the war might go beyond May. 

Considering both the scenarios will help the MPC to discuss in the next MPC in detail about the policy rate, the stance to be taken and continuance of liberal liquidity measures, undertaken now. (continued liquidity and continued credit growth may result in more loan delinquencies in an inflation driven economy)

If the current realities are taken into account, the CPI inflation may go around 5% in the first scenario and around the upper band of the target rate (6%) in the second scenario. (For every USD 10 increase in crude oil above USD 100 may increase CPI inflation by 50 bps and bring down GDP growth by 25-30 bps). So GDP growth may also tamper down considerably.

Let us wait for the report of MPC on the current situation and enrich ourselves better.

Regards

V.Viswanathan

CGM Retd. e-SBT

5th April 2026