SBI Research Calls for Vigilant Inflation Monitoring in FY27 Amid New CPI Series Implementation
In a significant report, SBI Research has emphasized that the trajectory of inflation must be closely monitored before the Reserve Bank of India (RBI) makes any monetary policy decisions for the fiscal year 2026-27. This caution comes as India prepares to introduce a new Consumer Price Index (CPI) series with a base year of 2024, set to be officially released on February 12, 2026, according to government announcements.
Impact of Revised Macroeconomic Indicators on Policymaking
The Ministry of Statistics and Programme Implementation is currently revising the base year for key macroeconomic indicators, including the CPI, Gross Domestic Product (GDP), and Index of Industrial Production (IIP). These indicators play a vital role in shaping economic policies at the RBI, influencing everything from interest rates to growth strategies. The transition to the new CPI series is expected to provide more accurate and up-to-date data, which could alter inflation assessments and subsequent policy responses.
Recent RBI Policy Decisions and Economic Projections
In a recent development, the Monetary Policy Committee (MPC) of the RBI unanimously decided to keep the repo rate unchanged at 5.25 percent, while maintaining a neutral stance. This decision was informed by several factors, including GST rationalization, healthy rabi crop prospects, and a benign inflation environment. As a result, the GDP growth outlook has been revised upward to 6.9 percent for the first quarter of 2026-27 and 7 percent for the second quarter.
For the fiscal year 2025-26, retail or CPI-based inflation is projected at 2.1 percent, with the fourth quarter CPI estimated at 3.2 percent. SBI Research noted that the slight upward revision in the 2025-26 projection is primarily due to an increase in prices of precious metals, highlighting the nuanced factors affecting inflation trends.
Currency Movements and RBI Interventions
Following the RBI's policy announcements, the Indian rupee experienced a significant appreciation. SBI Research suggested that this unexpected movement presents an opportunity for the RBI to recoup dollars when the rupee strengthens below the 90 mark. Typically, the RBI intervenes in currency markets by managing liquidity, including selling dollars to prevent steep depreciation and strategically buying dollars when the rupee is strong to stabilize exchange rates.
Regulatory Reforms and Fraud Prevention Measures
On the regulatory front, the RBI has focused on reforming current practices related to cross-selling, loan recovery methods using agents, and establishing a framework for compensation in cases of small-value fraudulent transactions. A Discussion Paper aimed at curbing fraud in digital payments will explore the implementation of calibrated safeguards, such as lagged credits. According to SBI Research, the number of banking frauds has increased from 13,494 in 2022-23 to 23,879 in 2024-25, underscoring the urgency of these measures.
Enhancements in Lending and Investment Frameworks
In another major announcement, the RBI has permitted lending to Real Estate Investment Trusts (REITs) in line with Infrastructure Investment Trusts (InvITs). This allows banks to lend to projects in the operational phase through REITs or take equity stakes. SBI Research described this provision as a positive development that furthers the Budget announcement for monetizing CPSE assets through REIT structures, facilitating fund flow to the sector.
Additionally, the RBI has decided to enhance the limit of collateral-free loans to Micro and Small Enterprises (MSEs) from Rs 10 lakh to Rs 20 lakh, a move expected to boost financial support for small businesses and stimulate economic growth.
Overall, SBI Research's report underscores the critical need for vigilant inflation monitoring in FY27, as the new CPI series could reshape economic assessments and policy directions, impacting everything from interest rates to currency stability and regulatory frameworks.
