The Reserve Bank of India may prioritize stability in policy rates for FY27, according to a detailed Crisil Ratings analysis released this week. With CPI inflation expected to edge up mildly due to food price normalization, the MPC could resist rate adjustments.
Non-food components face downward pressure from cheap oil and GST relief in the year’s first half, helping to cap overall inflation. This environment supports a ‘wait-and-watch’ approach from the central bank.
On the growth front, FY27 GDP is tipped to grow 6.7% (2011-12 base), aligning with historical norms. Deflator risks loom, but aggressive public capex and private investment upticks signal sustained vigor.
Global positives are aiding India’s stance. US-India trade negotiations have fortified the rupee, alongside FPI return flows. The currency is forecasted to settle at 89/USD by end-March 2027.
FPIs have poured in $2.8 billion net in February till the 16th, lifting the rupee from January-end 92 to 90.7 levels, markedly reducing depreciation risks.
Although headline rates stay put, previous hikes ensure elevated transmission to market rates. Crisil’s January FCI reading of -0.5 underscores tighter-than-average conditions, deftly managed by RBI tools.
Liquidity support via OMO bond buys and rupee-dollar swaps has been crucial. Coupled with 125 bps easing, lending rates have softened, boosting bank loans and fostering a conducive growth environment.