The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) began its meeting on Monday, with the policy decision set to be announced on Wednesday, April 8. This time, the meeting comes at a difficult moment, as global tensions and rising oil prices have made the central bank’s job more complex.
The will decide whether to keep the repo rate unchanged, increase it, or cut it. The RBI MPC decision is taken every two months by a six-member panel.
The biggest challenge for the RBI right now is the ongoing conflict in West Asia. A US-Israel military campaign against has led to a sharp escalation, including missile and drone attacks in the region.
Iran has responded by shutting the Strait of Hormuz, which is a key route for global oil and gas supply. Normally, around 200 to 300 ships pass along this route every week. Now, this has dropped drastically, which has sharply reduced supply.
. Brent crude has touched as high as $118 per barrel and is now hovering close to $100. At the same time, the US Dollar Index has stayed strong above 100.
Global markets are reacting to these developments, and economic decisions are now being influenced by geopolitical risks as much as by data.
India is among the countries most affected by this situation. It imports around 85-90% of its needs. A large part of these imports, nearly 40-52%, comes through the Strait of Hormuz.
This means any disruption in that route directly affects India’s energy supply and costs. Analysts estimate that every $10 rise in crude oil prices increases India’s annual import bill by about $14 billion.
The impact is already visible on the currency. The rupee has weakened around 4.1% since the conflict escalated on February 28, 2026. It touched a record low of 92.35 against the dollar in March.
Foreign investors have also pulled out large amounts of money. In March alone, foreign institutional investors sold nearly Rs 1.2 lakh crore worth of Indian equities. Stock markets have also seen pressure, with Sensex and Nifty falling over 5% in a few sessions, wiping out more than Rs 12 lakh crore in investor wealth at one point.
The stress is not limited to oil. Several sectors are feeling the impact.
The agriculture sector may face issues due to possible disruption in fertiliser and urea supply from the Gulf region, especially ahead of the Kharif season.
Industries such as aviation, transport, chemicals, packaging, textiles and steel are also seeing higher costs due to expensive fuel and logistics.
There is also concern over remittances. Around 30% of India’s remittances come from the Middle East, making up slightly more than 1% of the country’s GDP. Any slowdown there could affect these inflows.
are also affecting growth outlook.
HSBC estimates that if crude oil averages $80 per barrel, India’s GDP growth could slow to 6.3% from earlier expectations of 7%. If oil stays around $100, growth could fall further to around 6%.
India’s Chief Economic Advisor has warned that if oil prices remain at $130 per barrel for two to three quarters, inflation could rise to 5.5% and growth could slow to 6.4% in FY27.
This creates a difficult situation where both inflation and growth are under pressure at the same time.
The RBI now faces a tough choice.
On one side, higher oil prices can push inflation up. This may require keeping interest rates high or even increasing them to control prices.
On the other side, slower growth may require lower interest rates to support the economy.
This is why the upcoming policy decision is not straightforward.
Since February 2025, the RBI has already reduced the repo rate by 125 basis points. However, it has kept rates unchanged in its last three policy reviews. The current rate stands at 5.25%.
Most experts believe a rate cut is unlikely this time.
ICRA’s Chief Economist Aditi Nayar said that given the uncertainty around oil prices and global developments, the RBI is likely to stay on pause and watch how inflation moves.
There is also a growing view in the market that the RBI may need to take a stricter approach if inflation rises further. Some market indicators suggest that investors are even preparing for the possibility of rate hikes.
Inflation, which had eased to 3.2% in February, may now move closer to 5% if oil prices stay near $100.
For markets, what the RBI says may be as important as what it does.
Investors will watch closely if RBI Governor Sanjay Malhotra signals a continued pause or hints at future action. There is also focus on how the RBI plans to manage liquidity and support the rupee.
CareEdge Ratings’ Chief Economist Rajani Sinha said that if the conflict continues, it could hurt growth while keeping inflation high, making the RBI’s task more difficult.
Madan Sabnavis, Chief Economist at Bank of Baroda, said, “We do not expect any change in repo rate or stance this time. The tone will be cautious and what will be eagerly awaited is RBI’s forecast of GDP and inflation under the prevailing uncertainty. We do not expect any measures for either liquidity or currency management as RBI will do whenever required as we have seen of late.”
Just two months ago, the situation looked very different.
In its February 6 meeting, the RBI had projected inflation for FY26 at 2.1%, with a gradual rise to around 4% in early FY27. Food supply was seen as stable, and inflation pressures were considered under control.
Growth outlook was also strong. The RBI had projected GDP growth at 7.4% for FY26, supported by strong demand and earlier rate cuts.
Governor Malhotra had described the economy as being in a “Goldilocks phase”, meaning steady growth with low inflation.
However, the situation has changed quickly.
Inflation expectations for FY27 are now seen in the range of 4.5% to 5.1%. Growth estimates have also been lowered to around 6.5-6.7%.
The risks that were earlier seen as possibilities have now become reality. Rising oil prices and global tensions have changed the outlook within weeks.
For common people, this policy matters because it affects loan EMIs, deposit rates and overall cost of living.
If the RBI keeps rates unchanged, EMIs are likely to remain stable for now. However, if inflation rises further, the chances of rate cuts in the near term may reduce.
Higher oil prices may also lead to increased fuel costs, which can affect daily expenses.
The RBI’s decision on April 8 will give a clearer direction on how it plans to handle this situation. For now, caution is likely to remain the key approach as global uncertainty continues.