The recent Monetary Policy Committee (MPC) meeting held in February resulted in a decision to maintain the current policy rate and stance, aligning with market expectations. The committee has adjusted its average growth projection for the first half of the fiscal year 2026-27 (H1FY27), increasing it by 20 basis points to 7%. Similarly, the consumer price index (CPI) inflation forecasts for both FY26 and H1FY27 have been revised upward by 10 basis points. Analysts predict that a proposed reduction in tariffs could potentially boost GDP growth by around 20 basis points, leading to a projected growth rate of 7.2% for FY27, while CPI inflation is expected to stabilize at approximately 4% in FY27. However, close attention will be needed for the upcoming new series of both CPI and GDP, as they may prompt minor adjustments to these projections.
On liquidity, the RBI Governor reiterated the central bank’s commitment to safeguarding comfortable liquidity conditions through timely and necessary interventions. Analysts expect that the RBI will continue its liquidity injection measures, particularly in March when tax-related outflows typically surge. Maintaining a favorable liquidity environment is crucial for the effective transmission of previous rate cuts.
From an external perspective, the reduction of uncertainties surrounding trade policies, particularly following recent trade agreements, is anticipated to lend support to the Indian rupee. This might enable the RBI to decrease its foreign exchange market interventions that have risen due to heightened volatility in recent months, ultimately aiding rupee liquidity. Looking ahead, experts do not foresee any further rate cuts from the RBI unless significant downside risks to growth surface.
These developments represent a cautiously optimistic outlook for India’s economy, highlighting resilience and adaptability amidst ongoing economic dynamics.