RBI April Policy: Caution Seen As West Asia Shock Clouds Inflation And Growth

India heads into the April 8 policy review with inflation still below target, but oil, rupee and bond-market stress now pushing the central bank towards caution.

The April policy review is no longer just about rates. It is now about how India handles a fresh external shock without hurting domestic growth. A Reuters poll published on March 27, 2026 found 69 of 71 economists expect the repo rate to stay at 5.25% on April 8. 

That view has held even after the West Asia conflict pushed Brent crude to around $115 a barrel, sent the rupee beyond 95 per dollar, and lifted bond yields above 7%. India’s CPI inflation, however, was still at 3.21% in February.

Why The April Rate Decision Has Become More Delicate?

The immediate issue is imported inflation. India is entering the policy window with oil prices elevated, the rupee under pressure and market volatility already tightening financial conditions. 

Yet headline inflation is still below the 4% target, which gives policymakers some room to avoid a rushed response. That is why the likely approach is calibrated: hold rates, acknowledge risks, and wait for clearer data from April and May before shifting stance.
 

The policy debate is therefore shifting from rate cuts to damage control.

Why A Pause Looks More Likely Than A Policy Shift?

The strongest case for a pause comes from the mismatch between inflation data and market stress. February CPI at 3.21% does not justify an immediate rate hike on its own. 

But Reuters reported on March 30, 2026 that the rupee fell to a record low of 95.21 per dollar intraday, while the 10-year government bond yield climbed to 7.0345%. Brent crude was near $115.25 a barrel the same day. That means borrowing costs, imported prices and sentiment have already worsened even before any formal policy move.

There is also a growth angle. Reuters reported on March 24, 2026 that the HSBC flash India Composite PMI dropped to 56.5, the weakest in more than 3 years, with input cost inflation at its highest since June 2022. For a central bank, that is an awkward mix: softer momentum and stronger cost pressure at the same time.

How Inflation, Oil And The Rupee Changed The Policy Mood?

The stress has built quickly. First came firmer CPI, then weaker business activity, and then sharper external-market pressure as the West Asia conflict intensified. 

The Wall Street Journal reported on March 30, 2026 that India’s government had flagged “multi-layered” risks from higher petroleum imports, logistics costs, weaker exports and currency depreciation. Reuters separately reported on March 28, 2026 that official assessments now see downside risk to the 7.0%-7.4% FY27 growth forecast.
 

Reuters, March 28, 2026 / WSJ, March 30, 2026 

Growth outlook faces pressure from energy costs, supply disruption and a wider external gap

Reuters, March 30, 2026 / Business Standard, March 31, 2026

Rupee moved past 95; some forecasts now see 97 if the conflict drags

This leaves April looking less like a rate-setting event and more like a stability review.

Statements By Stakeholders

Economists in the Reuters poll back a hold at 5.25%. Chief Economic Adviser V. Anantha Nageswaran said clearer growth signals would emerge after April and May data, according to the Wall Street Journal.