The Reserve Bank of India will probably keep its key policy interest rates unchanged during the upcoming monetary policy review. This meeting is scheduled for February 4 to 6. Ratings agency Crisil made this prediction on Monday. They cited a recent uptick in inflation as the main reason for this expected decision.
Recent Rate Cut and Current Stance
In December, the Monetary Policy Committee reduced the repo rate by 25 basis points. It now stands at 5.25 percent. The committee maintained a neutral stance at that time. This signaled that future policy moves would depend heavily on incoming economic data.
Since that December meeting, inflationary pressures have started to firm up. News agency ANI reported these early signs. Crisil explicitly stated its expectation in a report. "We expect the RBI to stay put on policy rates given the creep up in inflation," the agency said.
Inflation and Growth Dynamics
India's retail inflation climbed to 1.33 percent in December. This was up from 0.71 percent in November. The increase marks a moderate rise. However, inflation continues to stay below the RBI's target band of 2 to 4 percent.
RBI Governor Sanjay Malhotra recently described the economic situation. He called it a "rare goldilocks period." This phase combines strong economic growth with unusually low inflation. Reflecting this positive momentum, the central bank upgraded its GDP growth forecast. It now expects 7.3 percent growth for the current financial year. This revision was based on robust performance in the July-September quarter.
Economic Outlook for the Coming Year
Crisil anticipates a moderation in economic growth for the next financial year. The agency forecasts GDP expansion of 6.7 percent for the coming fiscal year. This compares to the first advance estimate of 7.4 percent for the current year.
The agency outlined several factors likely to slow growth. A challenging global trade environment is one key headwind. Moderating domestic fiscal support is another. Waning support from statistical factors also plays a role. These include the fading benefit of a low base and this fiscal year's low deflator.
"These elements are expected to drag growth next fiscal," Crisil noted. "However, nominal growth is expected to be higher due to rising inflation."
Official Estimates and Inflation Projections
According to the National Statistics Office, India's real GDP is projected to grow 7.4 percent in the current fiscal year 2025-26. This is an increase from 6.5 percent growth in the previous year.
On the inflation front, Crisil projects a significant rise. Retail inflation is expected to reach 5.0 percent in the next fiscal year 2026-27. This is up from an estimated 2.5 percent in the ongoing fiscal year.
The agency explained the factors behind this projection. "Low food inflation of this fiscal should lend a statistical lift to inflation next year," the report stated. "However, softer commodity prices and the continued impact of GST rationalization should keep inflation within the RBI's target band."
Crude Oil Price Forecast
Crisil also provided its outlook on crude oil prices. It expects prices to remain subdued. The agency projects oil to average between 62 and 67 US dollars per barrel in the current fiscal year. For calendar year 2026, the forecast range is 60 to 65 dollars per barrel.
Brent crude averaged 62.7 dollars per barrel in December. This represented a decline of 1.4 percent from the previous month. It was also 15.1 percent lower than the price from a year earlier.
