RBI MPC Likely to Hold Policy Rates Steady in FY27 as CPI Inflation Set to Rise: Crisil

CPI Inflation Expected to Edge Up as Food Prices Normalize​

The Monetary Policy Committee of the Reserve Bank of India is likely to keep policy rates unchanged in fiscal year 2027, even as consumer price index inflation is projected to increase, according to a report released on Tuesday by Crisil Ratings.

The report stated that CPI inflation will rise as food inflation normalizes. However, non food inflation is expected to remain moderate, supported by lower crude oil prices and continued benefits from tax cuts on goods and services during the first half of the year.

GDP Growth Projected at 6.7 Percent in FY27​

Crisil Ratings expects economic growth to remain close to its long term trend. Based on the 2011 to 12 series, the agency projected gross domestic product growth at 6.7 percent in fiscal year 2027.

While a higher deflator is expected to weigh on real growth, the report highlighted that the central government’s capital expenditure and early signs of a revival in private investment are likely to provide momentum to the economy.

Rupee Outlook Improves on US India Trade Deal​

The report noted that the US India trade deal has improved prospects for the rupee and encouraged the return of foreign portfolio investors. The rupee is projected to settle at 89 against the US dollar by March 2027.

As of February 16, foreign portfolio investors had made net investments of 2.8 billion dollars in February, easing pressure on the domestic currency. The rupee has strengthened to around 90.7 from roughly 92 at the end of January.

Financial Conditions Remain Within Comfort Band​

The Crisil Financial Conditions Index remained stable month on month at minus 0.5 in January, indicating that financial conditions were tighter than the long period average measured since April 2010.

Despite this, the index remained within the comfort band, largely due to actions by the Reserve Bank of India.

Open market operation purchases of government securities and the USD INR buy sell swap helped cushion systemic liquidity. Softer lending rates, supported by the 125 basis points rate cut in the current easing cycle, continued to back bank credit growth.

Although policy rates are expected to remain steady, Crisil said the transmission of past rate hikes to broader interest rates in the economy will continue in the coming fiscal year.