RBI rate hike unlikely as economists flag geopolitical uncertainty, El Niño risk
Synopsis
RBI stays in wait-and-watch mode as economists rule out any urgency to tighten rates — even as April inflation is set to climb and El Niño clouds the monsoon outlook.
Key Takeaways
RBI kept the repo rate unchanged at 5.25% in its April meeting with a neutral stance.
India's April inflation is expected to rise to 3.9% YoY from 3.4% the previous month, according to DBS Bank .
Food inflation is forecast to edge up to 4.5% from 3.7% , driven by tomatoes, eggs, cereals, and edible oils.
Core inflation is expected to remain stable at 3.4% , aided by a pullback in precious metal prices.
Bank of Baroda Chief Economist Madan Sabnavis sees dimmed prospects for further rate cuts, with RBI projecting GDP growth at 6.9% and inflation at 4.6% .
El Niño developments and their impact on monsoon strength remain a key risk factor being monitored.
Economists on Friday, 8 May said they do not expect the Reserve Bank of India (RBI) monetary policy committee to exhibit any urgency to tighten the policy rate, even as a fast-evolving geopolitical situation and rising food prices add complexity to the central bank's outlook. The assessment follows RBI Governor Sanjay Malhotra's signal last month that the central bank was in no hurry to move on rates.
RBI's Current Stance
Governor Malhotra stated last month that the RBI is closely monitoring the fallout from the West Asia conflict and will not make firm commitments on the future path of policy rates.
Point of View
But the inflation trajectory deserves closer scrutiny. April's expected rise to 3.9% is still within the target band, yet the combination of food price pressures, a weak rupee, elevated global commodity costs, and a potentially disrupted monsoon could rapidly compress the central bank's room to manoeuvre. The fact that WPI already outpaced retail inflation in March — and is expected to extend that trend — suggests pipeline pressures are building. If El Niño materialises with force, the RBI may find itself forced into a reactive tightening cycle rather than a calibrated one, which is precisely the scenario it is trying to avoid.
NationPress
28 Jun 2026
Frequently Asked Questions
What is the current RBI repo rate?
The RBI kept the repo rate unchanged at 5.25% with a neutral stance at its April meeting. Economists do not expect any urgent move to tighten rates in the near term.
Why are economists not expecting the RBI to raise rates immediately?
Economists cite a fast-evolving geopolitical situation, particularly the West Asia conflict, as a key reason for the RBI's cautious stance. Governor Sanjay Malhotra has signalled the central bank is in a 'wait-and-watch mode' and will not make firm commitments on future rate moves.
What is India's inflation outlook for April 2025?
According to DBS Bank Senior Economist Radhika Rao, India's April inflation is expected to rise to 3.9% YoY from 3.4% in March. Food inflation is forecast to climb to 4.5% from 3.7%, driven by perishables such as tomatoes and eggs, cereals, and edible oils.
What is El Niño's role in RBI's policy outlook?
The RBI has flagged El Niño as a risk to inflation, as it could disrupt monsoon patterns and push food prices higher. Bank of Baroda's Chief Economist Madan Sabnavis cited this as one reason further rate cuts appear unlikely.
What has Assocham said about the RBI's April policy decision?
Assocham appreciated the RBI's April decision to hold rates, describing it as a 'calibrated step aimed at strengthening stability in the macroeconomic environment' that helps sustain growth momentum and ensure price stability.
