The meeting, which was held for the first time after the beginning of West Asia war, highlighted the risks evolving from the crisis and its impact on India.

The meeting, which was held between April 6-8, was the first monetary policy meet of the new financial year 2026-27. The Middle East conflict disrupted oil supply routes and pushed up crude prices higher after tension broke out between Israel, Iran and the US on February 28.

RBI MPC on West Asia Crisis

1. The West Asia conflict will adversely impact growth. Higher input costs associated with increase in energy prices and international freight and insurance costs along with supply-chain disruptions could constrain availability of key inputs for downstream sectors, thus impairing growth.
2. Persistently elevated energy prices due to the West Asia conflict and possible El Niño conditions (which could have a negative impact on southwest monsoon) pose upside risks to inflation
3. The MPC noted that the intensity and the duration of the conflict in West Asia and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks
4. The ongoing conflict has led to large volatility in international energy and other commodity prices imparting considerable uncertainty to the near-term inflation outlook.
5. The pass-through of higher global energy prices has resulted in price increases in select fuels such as premium petrol and LPG and diesel for industrial use.
6. The economy is confronted with a supply shock. It is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook.

RBI MPC Meeting April 2026: Key takeaways

Here are the key takeaways from the latest RBI Monetary Policy.

1. West Asia conflict and global economic headwinds

On the global outlook, the outbreak of the conflict in West Asia has led to severe disruption of global supply chains. This poses an unprecedented challenge for the global economy - higher prices and lower global growth. In this environment, monetary policy faces a difficult trade-off - anchoring inflation expectations through policy tightening while minimising its impact on growth forgone.

2. Fundamentals of the Indian economy are on a strong footing to withstand shocks

On the domestic front, the Indian economy remained resilient in 2025-26. Real gross domestic product (GDP) is estimated to grow by 7.6 per cent (y-o-y) during the year, as per the Second Advance Estimates (SAE) of the new GDP series (base year 2022-23). Private consumption and fixed investment contributed significantly to overall growth, while net external demand remained soft. On the supply side, estimated real GVA growth of 7.7 per cent was driven by the buoyant services sector and robust manufacturing activity.

3. Risk of supply shock evolving into demand contraction

Elevated energy and other commodity prices, coupled with supply shock due to disruptions in the Strait of Hormuz, would act as a drag on domestic production in 2026-27. Heightened volatility in global financial markets, with its spillover on domestic financial conditions, would weigh on growth prospects. On the external front, merchandise exports may be adversely impacted by disruptions to key shipping routes and the concomitant rise in freight and insurance costs in case the conflict is long-drawn.

4. FY27 GPD projected at 6.9%: GDP for FY26 seen at 7.6% as per the new series vs 7.4% projected earlier

Real GDP growth for 2026-27 is projected at 6.9 per cent, with Q1 at 6.8 per cent; Q2 at 6.7 per cent; Q3 at 7.0 per cent; and Q4 at 7.2 per cent (Chart 1). Further escalation of the conflict, its continuation over a wider geographical spread and uncertainty regarding the damage to the energy infrastructure, apart from weather-related events, pose downside risks to the domestic growth outlook.

5. Inflation forecast for FY27 at 4.6%, with Core CPI seen at 4.4%

As per the new CPI series (2024=100), headline inflation increased to 3.2 per cent in February 2026 from 2.7 per cent in January. The uptick was primarily driven by unfavourable base effects, even as the momentum remained muted. While food inflation increased in February, core (excluding food and fuel) inflation remained unchanged. Excluding precious metals, core inflation remained moderate at 2.1 per cent in January and February, suggesting subdued underlying inflation pressures.

6. Macroeconomic Outlook: Stable inflation amid growing uncertainty

Geopolitical uncertainties have heightened significantly. Headline inflation remains contained and below the target, but upside risks to the inflation outlook have increased, driven by increased energy price pressures and probable weather disturbances affecting food prices. Core inflation pressures remain muted, although supply chain dislocations and the risk of second-round effects render the future inflation trajectory uncertain.

7. Economic activity remains strong despite geopolitical disruptions

High-frequency indicators till February 2026 suggest the continuation of strong momentum in economic activity. Growth impulses continue to be supported by robust private consumption and investment demand. However, the West Asia conflict will adversely impact growth. Higher input costs associated with an increase in energy prices and international freight and insurance costs, along with supply-chain disruptions, could constrain the availability of key inputs for downstream sectors, thus impairing growth. The Government has taken several measures targeted at supporting exports and protecting supply chains, which should mitigate the adverse impact of the conflict.

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