NewKerala.com

RBI Likely to Hold Rates This Fiscal as Growth Concerns Trump Inflation Risks: Crisil

Crisil Intelligence expects the RBI's Monetary Policy Committee to maintain current policy rates through the fiscal year, as growth concerns outweigh inflation risks. The report highlights that producers are bearing higher energy and input costs, while retail inflation remains contained. The government aims to reduce the fiscal deficit to 4.3% of GDP by FY27, with gross market borrowing rising to Rs 16.1 lakh crore. The current account deficit is projected to widen to 1.5% of GDP in FY27, driven by higher import costs and potential export disruptions.

Key Points: RBI to Maintain Rates This Fiscal: Crisil

  • RBI likely to maintain policy rates this fiscal
  • Downside to growth bigger concern than inflation
  • Government targets fiscal deficit reduction to 4.3% of GDP by FY27
  • Current account deficit expected to widen to 1.5% of GDP in FY27
3 min read

Downside to growth bigger concern than upside risk to inflation, RBI to maintain rates this fiscal: Crisil

Crisil says RBI's MPC likely to maintain policy rates this fiscal, as downside to growth is a bigger concern than upside risks to inflation.

Downside to growth bigger concern than upside risk to inflation, RBI to maintain rates this fiscal: Crisil
"Our base case expectation is the MPC would maintain the policy rates this fiscal - Crisil Intelligence"

New Delhi, April 29

The Reserve Bank of India's Monetary Policy Committee is likely to maintain current policy rates through the fiscal year as concerns over economic growth outweigh risks from inflation, according to a report by Crisil Intelligence.

The report stated that the downside to growth is a bigger concern than upside risks to inflation in the current environment.

It noted that producers are bearing the brunt of higher energy and input costs, while the government has limited the increase in retail energy prices, thereby containing inflation at the consumer level.

"Our base case expectation is the Monetary Policy Committee (MPC) would maintain the policy rates this fiscal," the report said, adding that the central bank is likely to continue its cautious approach.

The MPC had kept policy rates unchanged at its April meeting and maintained a neutral stance, providing flexibility for future policy actions. However, the report cautioned that a prolonged geopolitical conflict could reduce the available monetary space for the central bank.

On fiscal health, the report highlighted that the government has targeted a reduction in the Centre's fiscal deficit to 4.3 per cent of GDP in fiscal 2027, down from 4.4 per cent of GDP in fiscal 2026 (revised estimates). It also noted that the government met its fiscal deficit target for fiscal 2026.

Gross market borrowing is projected to increase to Rs 16.1 lakh crore in fiscal 2027 from Rs 14.6 lakh crore in fiscal 2026 (revised estimates). Around 51 per cent of the borrowing is expected to be undertaken in the first half of the fiscal year.

The report also provided an outlook on the external sector, stating that the current account deficit (CAD) is expected to widen to 1.5 per cent of GDP in fiscal 2027 under the base case, compared with a projected 0.8 per cent of GDP in fiscal 2026. In an alternative scenario, the CAD could widen further to 2.0 per cent of GDP.

The widening of the CAD is likely to be driven by a higher import bill due to elevated crude oil prices, as well as gas and fertiliser imports in the alternative case. Additionally, disruptions caused by the ongoing conflict could impact exports, leading to a rise in the goods trade deficit.

However, the report noted that a healthy services trade surplus is expected to limit the extent of the widening in the current account deficit. It also pointed out that the current account deficit had narrowed to 1.0 per cent of GDP in the third quarter of fiscal 2026, compared with 1.3 per cent in the corresponding quarter of fiscal 2025.

- ANI

Share this article:

Reader Comments

S
Shreya B
Finally some good news for borrowers! If rates stay stable, home loan EMIs won't increase further. But the widening current account deficit is concerning - especially with crude prices elevated. Government needs to focus on exports and reduce import dependence on energy.
A
Aditya G
Nice analysis from Crisil. The point about government limiting retail energy price increases to contain consumer inflation is spot on. But producers are really suffering with high input costs - that could hurt investment and job creation. RBI needs to balance growth and inflation carefully. India's economic fundamentals are strong though 💪
R
Raghav A
The fiscal deficit reduction target is good, but gross market borrowing increasing to Rs 16.1 lakh crore raises questions about crowding out private investment. Also, the CAD widening to 1.5% of GDP isn't alarming, but the alternative scenario of 2.0% is risky if geopolitical tensions escalate. Hope the government uses the fiscal space wisely.
P
Pallavi W
As a small business owner, I'm relieved rates might stay stable, but honestly, the high input costs are killing margins. I've had to absorb most of the increase because customers can't handle higher prices. The report should talk more about support for MSMEs. Still, good that the MPC is thinking about growth first. 🇮🇳
D
Deepak U
The services trade surplus being a buffer is an underrated point. India's IT and professional services are our strength. But relying on that alone won't be enough if goods trade deficit worsens. Need more manufacturing push. The 51% borrowing in first half is aggressive - hope bond markets can absorb it without yields spiking.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50