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No need for a rate hike unless inflation spikes: Economists

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No need for a rate hike unless inflation spikes: Economists
Mumbai: Bank economists have told the Reserve Bank of India (RBI) at a pre-policy meeting that there is no immediate need to either raise the repo rate or change the stance, provided inflation remains within the central bank’s tolerance band, multiple participants in the discussions told ET.

They also added that RBI has alternative tools to manage currency pressures and is unlikely to resort to a rate hike, unless the impact becomes visible in inflation, one economist said.

Discussions at the meeting were largely centred on the war, the risk of a pick-up in inflation, and the expectation of a global growth slowdown, another economist who attended the meeting told ET.

“Inflation forecasts by participants ranged from 3.5% to 5%, depending on where they see oil prices to average,” said an economist who participated in the discussions. “No one in the meetings suggested a rate hike or even a change in stance, as there is little clarity on how the situation in West Asia will evolve.”

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The central bank’s monetary policy committee (MPC) is scheduled to announce its first rate decision of FY27 on April 8.


The meeting with economists comes in the backdrop of the West Asia war, rising crude oil prices and inflationary pressures. Brent crude prices saw a record surge in March, rising by roughly 60-64% compared with February levels, according to Reuters, and have traded between $110 and $120 per barrel since the war broke out.

Screenshot 2026-04-02 054311Agencies

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“To the extent the ongoing energy shock does not translate into CPI inflation breaching the target durably, we believe the RBI MPC is unlikely to resort to rate hikes,” said a Barclays report.
RBI in its February 2026 policy held a status quo on repo rate at 5.25%. The central bank has reduced the repo rate by 125 basis points since February 2025.

Calls for a status quo are also emerging amid deep uncertainty over the duration of the US-Israel war on Iran.

Economists say the impact will largely depend on how long the war lasts, making it difficult for market participants to assess the scale of the shock or frame appropriate policy responses.

“More than the current inflation print, it is the outlook on how the situation would evolve in West Asia which would determine the policy decision on rates,” ICICI Bank said in a report early March.

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“Liquidity will remain the most important variable in the interim before we have much more clarity on energy markets and thus, we should see an extended pause for now.” Retail inflation stood at 2.75% in January, while GDP in Q2FY26 climbed 8.2%. RBI in its February policy projected inflation in Q1 and Q2 of FY27 at 4% and 4.2%, while GDP of Q1 and Q2 FY27 is projected at 6.9% and 7%, respectively.

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Every decision of government needn’t be a big reform: Anand Mahindra

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Anand Mahindra can’t wait to get back home from the US because all the action is happening in India with a new, stable government led by Narendra Modi in place. Hours after chairing a board meeting of Mahindra & Mahindra at midnight US time, the company’s chairman and MD spoke on Saturday to Satish John at length from Boston on his hopes and aspirations for the country. The new administration has begun well and a lot more is expected from it, he said. Excerpts:

On Modi government’s 10-point agenda.

I think it is almost brilliant to put at the head of the list the fact that bureaucrats should be encouraged to take decisions without fear. In a sense he’s gone to the heart of the problem of the paralysis. The Indian government is extraordinarily large and it is difficult to try and believe that one leader can make all the change. This is a federal system. In a large bureaucracy you cannot exercise the transformation of any situation without coopting bureaucracy.

So empowerment becomes important. It’s a good sign. If you remember, one of the major apprehensions about Modi was an autocratic style of functioning. By putting right at the top of the agenda the empowerment of the bureaucracy I think one has to appreciate and admit that it is definitely not the act of an autocrat.

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On disbanding ministerial groups.

Without making much heavy weather of it, he’s been a case study for business schools on how to exercise leadership and have an impact from day one in the new job. He’s setting a clear agenda and is making a clear promise of making a measurement of progress made against that clear agenda. For example, making an agenda for 100 days will make it clear what the matrix would be for measuring success of that agenda. It is important that every day some incremental progress is made towards that agenda and that progress is communicated transparently. He has got his team ready, which is a focused team. To me, every decision needn’t be a big-bang reform but a signal of proactive decision-making and removal of red tape and bureaucracy. And a promise of even speedier decision-making in the future.