The Reserve Bank of India (RBI) is anticipated to keep the repo rate unchanged in the upcoming June monetary policy meeting, as per an SBI Research report. The report advises utilizing short-term rates and nudging to handle the pressure on the domestic currency effectively.
The SBI report forecasts a GDP growth of 6.6% for FY27, subject to revisions due to ongoing geopolitical uncertainties as more data becomes available. It also projects the real GDP growth for Q4 FY26 to be around 7.2% and the FY26 GDP growth at 7.5%.
Based on the growth-inflation spiral, the current trajectory of the Consumer Price Index (CPI) suggests inflation rates exceeding 5.0% for the next three quarters, with the current quarter ranging from 4.0 to 4.1%.
The report highlights that the FY27 CPI inflation projections stand at 5%, with risks leaning towards an increase, although remaining within RBI’s target range. Despite robust macro fundamentals, the rupee is depreciating more than other currencies, necessitating increased intervention by the RBI.
The SBI report emphasizes the need for a comprehensive Balance of Payments (BOP) package to address the unidirectional slide of the rupee and manage volatility effectively. It also mentions the impact of ongoing ‘peace’ talks in West Asia on risk premiums and crude oil prices, which could potentially exceed $90 for a significant portion of 2026.
To offset Oil Marketing Companies’ (OMC) losses, the report suggests a reduction of Rs 5 in excise duty on diesel and petrol or a potential Rs 6 increase in domestic fuel prices from current levels.
