‘Iran war may lead to higher inflation in India’:Growth rate to fall going forward, indicates RBI

The Reserve Bank of India (RBI) said in its Annual Report 2025-26 that the conflict in West Asia may lead to upward revisions in global inflation forecasts and downside risks to trade and financial markets. The top bank has warned that inflationary pressures could intensify in India due to elevated crude oil prices, supply disruptions and global uncertainty. The central bank has projected India’s Consumer Price Index (CPI) inflation at 4.6% in 2026-27, compared to 2.1% in 2025-26. Inflation in 2026-27 is likely to remain aligned with the target… however, the evolving upside risks to inflation may emanate from multiple other factors such as spike in global fuel and commodity prices amid geopolitical tensions. – RBI Annual Report 2025-26 The RBI also warned about possible spillovers to input and wage costs. The central bank has projected India’s real GDP growth at 6.9% for 2026-27, as compared to 7.6% in FY26 and 7.1% in the preceding year. It is to be noted that India remained the fastest-growing major economy during 2025-26. Against the backdrop of a moderate global growth, the outlook for the Indian economy in 2026-27 remains positive, supported by strong macroeconomic fundamentals, although a prolonged West Asia conflict may pose downside risk. – RBI Annual Report 2025-26 The report added the country’s growth was supported by “strong domestic consumption, sustained investment, proactive policy initiatives and sound macroeconomic fundamentals.” RBI to be cautious with interest rate cuts, suggests report The annual report also suggested that the RBI may adopt a cautious approach on future monetary policy easing amid evolving inflation risks. The Monetary Policy Committee (MPC) had reduced the policy repo rate by 100 basis points during 2025-26 as inflation moderated sharply.
However, in April 2026, the MPC unanimously decided to keep the repo rate unchanged at 5.25 per cent while retaining a “neutral” stance. The news agency, ANI said that the RBI added that global central banks may increasingly face the challenge of balancing inflation control with growth concerns amid recurring supply shocks and geopolitical instability.