New Delhi, February 17: The Reserve Bank of India (RBI) is likely to maintain its policy interest rates in the fiscal year 2027, as a slight increase in consumer price index (CPI)-based inflation is anticipated.
A report released by Crisil Ratings on Tuesday suggests that food inflation may rise due to normalizing conditions, although lower crude oil prices and the benefits of GST cuts in the first half of the year could keep non-food inflation in check.
According to the report, economic growth is expected to remain around normal trends, with a projected GDP growth rate of 6.7 percent for FY2027 based on the 2011-12 series.
The agency noted that a potential increase in the deflator could exert some pressure on real growth; however, the central government’s capital expenditure and signs of improvement in private investment are expected to boost the economy.
The report also highlighted that the US-India trade agreement has strengthened the rupee’s position, with signs of foreign portfolio investors (FPI) returning. It is estimated that the rupee will stabilize at 89 per dollar by March 2027.
As of February 16, FPIs have made a net investment of $2.8 billion this month, easing pressure on the rupee. The rupee has strengthened from around 92 per dollar at the end of January to approximately 90.7.
While the likelihood of changes in policy rates is low, the impact of previous rate hikes will continue to affect interest rates in the economy.
The Crisil Financial Conditions Index (FCI) remained stable at -0.5 in January, indicating that financial conditions are slightly tighter compared to long-term averages, but RBI’s measures have kept the situation balanced.
The report mentioned that RBI’s open market operations (OMO) involving the purchase of government securities and dollar-rupee buy-sell swaps have supported liquidity in the system. The current easing cycle has led to a 125 basis points rate cut, which has reduced lending rates and supported bank loan growth.
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