RBI likely to keep rates unchanged through FY27; CPI inflation may edge up, growth seen at 6.7%: Crisil

India’s monetary policy is expected to stay on hold through the next fiscal year, with inflation risks limiting the scope for rate cuts even as growth remains stable, according to a latest note by Crisil.

The agency said the Reserve Bank of India (RBI) is likely to keep policy rates unchanged in FY27. This follows the monetary policy committee’s February decision to maintain the current stance, which Crisil noted was broadly in line with expectations. The report suggests the central bank will prioritise inflation management and macroeconomic stability over further easing in the near term.

Growth seen close to trend

Crisil projects India’s GDP growth at 6.7% in FY27, indicating the economy is likely to expand near its long-term trend. Growth is expected to be supported by the centre’s continued push on capital expenditure, improving private investment activity, and potential export support from progress in the proposed India–US trade arrangement.

However, the agency cautioned that a likely increase in the GDP deflator could weigh modestly on real growth, even as underlying economic momentum remains intact.

Inflation may tick up

On prices, the report expects consumer price index (CPI) inflation to rise moderately in FY27, mainly due to the normalisation of food inflation after a period of relative softness. Non-food inflation, however, is likely to remain contained, aided by comparatively lower crude oil prices and the continuing benefits of earlier indirect tax reductions in the first half of the year.

This combination of slightly higher headline inflation and stable growth, Crisil said, reduces the likelihood of policy rate cuts in the coming fiscal.

Financial conditions still somewhat tight

The report also noted that domestic financial conditions remained somewhat tight in January, though still within a comfortable range. Foreign portfolio investor outflows during the month pressured the rupee, liquidity surplus and equity markets, while government bond yields edged higher amid increased borrowing and firmer crude prices.

Despite these pressures, central bank actions — including open market bond purchases and forex swap operations — helped cushion liquidity conditions. Lending rates have continued to soften gradually, reflecting transmission of earlier rate cuts, while bank credit growth has remained strong in double digits.

External risks remain key monitorables

Looking ahead, Crisil flagged global geopolitical developments, commodity price movements and capital flows as key risks for the outlook. The agency expects the rupee to stabilise over the medium term, supported by improving foreign inflows and trade prospects.