RBI MPC Minutes Warn of Inflation Risks from Iran Conflict, El Niño Impact

The Reserve Bank of India has sounded a note of caution, flagging geopolitical tensions and climate risks as key threats to India’s economic outlook.

In the minutes of its April 6–8 Monetary Policy Committee meeting, the central bank warned that the ongoing West Asia conflict could disrupt global supply chains, leading to a mix of higher prices and slower growth. Particular concern was raised over potential disruptions in the Strait of Hormuz, a critical artery for energy shipments, which could push up input costs and weigh on domestic production in FY27.

The RBI also pointed to inflationary pressures building from multiple fronts. Persistently elevated energy prices, coupled with the possible emergence of El Niño conditions, could keep price levels under stress. A weaker monsoon linked to El Niño typically impacts agricultural output, raising food prices and complicating inflation management.

Reflecting these uncertainties, the MPC chose to hold the repo rate steady at 5.5% in April, signalling a cautious policy stance.

India’s growth outlook remains relatively resilient, with GDP projected at 6.9% for FY27, supported by strong domestic demand, a buoyant services sector, and improving manufacturing capacity utilisation. However, the RBI underscored that risks remain, particularly from volatile energy markets, global trade disruptions, and financial market instability.

On inflation, headline CPI is projected at 4.6% for FY27. The central bank, however, warned of upside risks driven by energy price swings and weather-related shocks, reinforcing its preference for a calibrated “wait-and-watch” approach in the near term.