The Reserve Bank of India (RBI) said in its annual report that CPI inflation in 2026-27 is projected at 4.6 per cent and is expected to remain aligned with the target, supported by adequate foodgrain stocks, sufficient reservoir levels and stable agricultural prospects, even as weather-related uncertainties persist.
The RBI said inflation risks remain tilted to the upside amid ongoing geopolitical tensions, which could trigger spikes in global fuel and commodity prices, spill over into input and wage costs, and add volatility to the exchange rate.
It said the Monetary Policy Committee (MPC), in its April 2026 meeting, kept the policy repo rate unchanged at 5.25 per cent while maintaining a neutral stance and continuing to closely monitor incoming information and the evolving balance of risks.
The RBI said the central government, in consultation with the central bank, has retained the inflation target at 4 per cent with a tolerance band of plus or minus 2 per cent for the period April 1, 2026 to March 31, 2031.
Yields may rise
On financial markets, the RBI said domestic bond yields could face upward pressure if the global monetary easing cycle stalls or reverses in response to persistent oil price shocks amid fragile geopolitical conditions. It said fiscal consolidation and liquidity support measures are expected to contain the impact on yields.
The RBI said equity markets will remain sensitive to geopolitical developments, global financial volatility and foreign portfolio investment flows, with a stronger US dollar and deterioration in risk sentiment potentially triggering capital outflows. It added that efforts to expand local currency settlement frameworks are expected to support INR-based cross-border transactions.
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