India’s RBI Holds Rates at 5.25 Percent, Slashes Growth Outlook
The Reserve Bank of India (RBI) held its policy rate at 5.25%, a decision consistent with market expectations, while revising its inflation projection for the financial year ending March 2027 upward by 50 basis points to 5.1%. The bank's growth forecast was trimmed to 6.6% from a prior estimate of 6.9%.
RBI Governor Sanjay Malhotra signaled a shift toward greater caution, citing the deteriorating international environment as a key factor shaping the bank's stance. He noted that sharply rising energy prices and widespread global supply chain disruptions were continuing to bear down on economic activity, with Middle East geopolitical tensions keeping the external outlook unsettled.
India, one of the world's largest energy importers, finds itself acutely exposed to the current commodity price environment. Elevated global oil prices have swelled the country's import bill and intensified pressure on the rupee, which has shed more than 6% of its value against the U.S. dollar year-to-date, trading near 95.78 against the greenback according to market data cited in the report.
Authorities have responded with a series of defensive measures aimed at stabilizing the currency and protecting foreign exchange reserves, including steps to restrain gold demand and limit the financial drag of fuel imports.
On the inflation front, domestic price pressures remain contained but are gradually building. India's consumer price index rose for a sixth straight month in April, reaching 3.48% — up from 3.40% in March — though the reading stayed below the RBI's 4% target. Food inflation, a politically sensitive and heavily weighted component of the index, accelerated to 4.2% in April from 3.87% the prior month, adding to the complexity facing policymakers as they navigate between supporting growth and keeping prices in check.
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