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(Bloomberg) — India’s policy makers decided to pause in April to get a clearer picture of the shock caused by the war in the Middle East, minutes of the last meeting showed.
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The six-member Monetary Policy Committee, headed by Reserve Bank of India Governor Sanjay Malhotra, voted unanimously to keep the repurchase rate unchanged at 5.25% at its April 6-8 meeting. It maintained a neutral stance after a temporary ceasefire raised hopes of an early end to the conflict and normalization of supply chains.
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“In such a situation, it is prudent to wait and watch, before making any decisive move,” Malhotra said, according to the minutes published on RBI’s website Wednesday.
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Monetary policy was facing a supply shock, but the underlying inflation pressures were contained, the RBI governor said. However, if the conflict prolongs, “it can make the task of central banks arduous.”
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The two-week long ceasefire was extended by US President Donald Trump on Tuesday. However, the Strait of Hormuz, through which India imports nearly half of its oil and most of its gas requirements, remains effectively shut amid ongoing disruptions, impacting economic activity.
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In a speech last week, Malhotra said the central bank may look through the immediate impact of the Iran conflict but will try to prevent its broader second-round effects on the economy.
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India’s inflation climbed 3.40% in March from a year earlier, up from 3.21% in February. The reading will likely climb after April if the government decides to pass on the impact of high crude oil prices to consumers. The RBI forecast inflation to average 4.6% in 2026-27.
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“A large part of the projected increase in inflation is due to the base effect, and higher oil prices,” Deputy Governor Poonam Gupta said at the panel’s meeting. The recently revised series for inflation and growth “will yield more stable numbers,” by improving accuracy.
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Here’s what other members in the panel said:
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- Indranil Bhattacharyya, an executive director at the central bank, said “supply driven inflation warrants a distinctly different policy response than a demand-driven one,” but monetary policy has limited ability to quell the direct effects of a supply shock
- External member Saugata Bhattacharya said energy prices are unlikely to return to their pre-conflict levels, “in the near or even the medium term”
- Nagesh Kumar, external member, said India’s current account deficit will likely worsen, while natural gas shortages have affected many micro and small enterprises that use it as a fuel
- Ram Singh, another external member, said it was “prudent for the monetary policy to be data driven with a focus on keeping inflation expectations anchored”
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