RBI MPC Policy Announcement | April 8, 2026 First Bi-Monthly Policy of FY27 | Governor Sanjay Malhotra Presiding

The MPC has been deliberating since April 6th, with the decision due tomorrow morning. Here is what the market is pricing in — and what I expect:
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1. Monetary Policy Has Limited Effectiveness Against Supply Shocks
This is the most important context for this month’s MPC . The inflation risk India faces today is not demand-driven — it is imported. Crude oil prices, which were hovering around $60/barrel for much of last year, have hardened to over $100 since the West Asia conflict began in late February. Rate hikes cannot fix a supply disruption. Raising rates to fight oil-price inflation would be a blunt instrument that would punish domestic growth without addressing the root cause. The RBI knows this well.
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2. Repo Rate on Hold at 5.25% ✅ (High Conviction)
Analysts are in broad agreement: the policy rate will be held steady and the stance will remain 'neutral', signalling that the central bank is not leaning toward either tightening or easing in the immediate future. Since February 2025, the RBI has cumulatively reduced the repo rate by 125 basis points to support economic growth, with the most recent cut of 25 bps coming in December 2025. That easing cycle is firmly on pause.
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3. Policy Stance Stays Neutral ✅ (High Conviction)
Economists expect the central bank to retain its current policy stance of 'neutral' in the upcoming review, reflecting a preference to maintain flexibility amid evolving inflation dynamics and global uncertainties. The tone of the policy is expected to remain cautious and watchful, with policymakers likely to highlight upside risks to inflation from volatile crude oil prices and geopolitical tensions. 
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4. Inflation Forecasts to Be Revised Upward ✅ (High Conviction)
While CPI inflation for February 2026 was recorded at a manageable 3.2%, projections indicate a sharp upward trend. The RBI's own estimates suggest CPI inflation will rise to 4.0% in Q1 FY27 and further to 4.2% by Q2. SBI Research has warned that imported inflation is already running at 5.4% and could push headline inflation above 4.5% for the next three quarters. Expect the RBI to revise its FY27 inflation forecast meaningfully upward from its earlier projections.
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5. GDP Forecasts to Be Revised Downward ✅ (High Conviction)
As against the earlier projected FY27 GDP growth between 7.0% and 7.4%, the post Feb 28th projections have acknowledged "considerable downside" to that forecast. CareEdge Ratings projects growth moderating to 6.7%, while ICRA has lowered its estimate to 6.5%. The slowdown is attributed to higher input costs for businesses which could dampen investment, and rising inflation eroding consumer purchasing power. Fiscal space is constrained with the pass through impact of petrol and diesel prices and the expected increase in fertilizer and cooking gas subsidies.
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6. Banks Given Flexibility to Stagger Treasury Losses Over 4 Quarters ⚠️ (Unconfirmed — Watch This Space)
This is a market rumour/expectation in circulation. With 10-year G-Sec yields having crossed 7% and bond prices falling, banks are sitting on mark-to-market (MTM) losses on their Gilt portfolios. Allowing staggered recognition of these losses over 4 quarters would be a prudential regulatory measure — well within the RBI's toolkit. However, I have not seen any official confirmation or analyst consensus on this specific measure for April 8th. Treat this as a possibility, not a base case.
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7. CRR and SLR Unchanged ✅ (High Conviction)
With the focus now on managing imported inflation and currency pressures, there is no basis to expect any CRR or SLR adjustment at this meeting. The RBI may instead use liquidity management tools such as Open Market Operations or an "Operation Twist" (buying long bonds, selling short bonds) to manage the yield curve if needed.
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Bottom Line: Tomorrow's policy is about tone, not action. The rate and stance are locked in. What matters is how hawkish the Governor sounds on inflation, how much he revises down growth, and whether there are any supplementary measures on liquidity or bank regulation. 

Views expressed are for informational purposes only and do not constitute investment advice.

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