– Mandar Pitale, Head, Financial Markets, SBM Bank(India) Ltd.
“MPC has kept policy rates unchanged with neutral stance, as expected, in context of the domestic economy entering the present global turbulent environment with much better fundamentals than in previous similar circumstances.
The outlook on growth and inflation is in line with market expectations, with FY 27 GDP projection down to 6.60% from 6.90% and FY 27 inflation projection up from 4.60% to 5.10% highlighting a considerable risk with distinct possibility of generalization of inflation through second round effect as an adverse implication of extended disruption in supply chain and elevated energy prices. Along with an overall cautionary outlook, highlighting considerable risks to the baseline assessment of inflation and growth, MPC has reiterated to remain data dependent with close vigil on supply side pressures getting embedded in general price levels and inflationary expectations.
Some of the important measures announced to attract foreign capital such as concessional forex swap for ECB hedging by PSUs, bearing full hedging cost of ADs for raising fresh 3-5 Year FCNR B deposits will act as a catalyst for bringing in a good amount of foreign currency inflows through these routes in near future.
The present inflation dynamics, with an average inflation forecast for FY 27 inching up to 5.1%, as stated by the MPC in its outlook, have created a strong case for at least two 25-bp rate hikes between August and December 2026.”