Commerzbank’s Dr. Henry Hao and Moses Lim note India’s economy remains supported by strong domestic demand and exports, with growth projected at 6.7% in fiscal 2026-2027 versus 8% previously. Inflation is forecast at 5%, within the RBI’s 2-6% band, allowing policy to stay on hold at 5.25%. FX reserves above USD700bn bolster RBI’s ability to smooth INR volatility, though higher Oil and Gold prices remain key risks.
RBI policy anchored by stable inflation
“The economy is holding up well, supported by firm domestic demand and encouraging export growth. Although growth is expected to moderate this year, it is still projected to expand by 6.7% for the current fiscal year 2026-2027 compared to 8% for the previous fiscal year.”
“Inflation remains stable and RBI is projecting 5% for the current fiscal year, which is within RBI’s 2-6% target range. RBI is in a wait-and-see mode and is expected to stay comfortably on hold at 5.25% this year.”
“RBI’s measures to attract foreign capital and stabilize INR have been successful. It will close the Foreign Currency Non-Resident (Bank) or FCNR(B) deposit scheme one month ahead of schedule on 31 August.”
“INR remains susceptible to a rise in global crude oil and gold prices. However, FX reserves have climbed back above USD700bn and this gives RBI greater capacity to smooth volatility if pressures return.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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