West Asia Crisis, Inflation Weighed On RBI Panel's Decision On Interest Rate: MPC Minutes
April 23, 2026
RBI MPC minutes show West Asia crisis and inflation risks drove a pause in rate decisions. Policymakers flagged supply shocks, weak growth outlook and global uncertainty
Uncertainties triggered by the West Asia crisis and its impact on inflation, as well as growth, weighed on the RBI monetary setting panel members' decision as they voted for the status quo on interest rates this month, according to the MPC meeting minutes released on Wednesday.
Following the three-day meeting, the RBI's Monetary Policy Committee (MPC) kept its key policy rate unchanged on April 8, adopting a cautious wait-and-watch stance as policymakers assessed the fallout from the Iran conflict on energy supplies, inflation and growth.
RBI Governor Sanjay Malhotra headed a six-member MPC voted unanimously to keep the benchmark repurchase rate at 5.25 per cent, flagging heightened uncertainty after the West Asia conflict drove crude prices sharply higher, a weak rupee and disrupted trade flows.
Malhotra opined that the West Asia conflict poses challenges to the Indian economy through a number of channels – exports, supply of critical commodities, elevated energy and other commodity prices, remittances, uncertainty, and subdued global demand.
As a result, supply chain disruptions, which may take longer to subside fully and restore the logistics network, pose downside risks to the growth and upside risks to inflation.
"If the conflict remains unresolved for a long duration, it can make the task of central banks arduous in their endeavour to rein in inflation expectations while minimising growth sacrifice," the minutes quoted Malhotra as saying.
MPC member and RBI Deputy Governor Poonam Gupta opined that under the circumstances, central banks need to continue to play a conducive role in supporting the productive requirements of the economy.
RBI Executive Director and rate-setting panel member Indranil Bhattacharyya noted that the global economic outlook, which was buoyant till the February MPC meeting, has deteriorated significantly after the outbreak of the West Asia conflict.
The consequent disruption in the logistics network has not only triggered a sharp increase in international energy prices, but it has also choked global trade flows, particularly those transiting through the Strait of Hormuz, which accounts for about half of India’s energy imports, he said.
While three members of the MPC are RBI officials, the other three are nominated by the government.
According to the minutes, Kumar said the April 2026 MPC meeting is taking place against the backdrop of the West Asia conflict, dramatically clouding the economic outlook for the global economy with significant spillovers for the Indian economic outlook for 2026-27.
At the time of the February 2026 MPC meeting, the outlook for the Indian economy seemed to have brightened considerably with the conclusion of the long-pending EU-India FTA negotiations on 27 January, the withdrawal of high Trump tariffs on exports to the US in February, and boosted by the Union Budget 2026-27 proposals, while inflation remained benign.
Bhattacharya said that despite tentative indications of a cessation of hostilities in the West Asia conflict and a consequent easing of tight global financial conditions, uncertainty regarding persisting dislocations of global supply chains remains heightened.
He further said monetary policy cannot influence energy prices, but can facilitate the process of economic adjustment in a way that sustainably achieves inflation targets.
"For me, the risks of a policy mistake have heightened amidst this uncertainty. Arguments for increasing the policy rate in anticipation of higher inflation are as risky as cutting rates in response to a fear of lower growth. Quantifying the glide path along a precise timeline is not an exact science," Bhattacharya added.
Ram Singh noted that the turmoil in the Strait of Hormuz is a drag on growth directly through oil supply disruptions and their effect on demand. This, along with disruptions in key shipping lines, has dampened the growth prospects of the global economy and Indian exports.
As of April 2026, the real GDP growth forecast for 2026-27 in Q1 is at 6.8 per cent, Q2 at 6.7 per cent, Q3 at 7.0 per cent, and Q4 at 7.2 per cent. The real GDP growth for 2026-27 is projected at 6.9 per cent, with downside risks increasing as the conflict persists.
"As per my assessment, the growth forecast is lower by 50-60 bps as of now due to the West Asia conflict," Singh said, as he voted in favour of the status quo on repo rate.
Following the three-day meeting, the RBI's Monetary Policy Committee (MPC) kept its key policy rate unchanged on April 8, adopting a cautious wait-and-watch stance as policymakers assessed the fallout from the Iran conflict on energy supplies, inflation and growth.
RBI Governor Sanjay Malhotra headed a six-member MPC voted unanimously to keep the benchmark repurchase rate at 5.25 per cent, flagging heightened uncertainty after the West Asia conflict drove crude prices sharply higher, a weak rupee and disrupted trade flows.
Malhotra opined that the West Asia conflict poses challenges to the Indian economy through a number of channels – exports, supply of critical commodities, elevated energy and other commodity prices, remittances, uncertainty, and subdued global demand.
As a result, supply chain disruptions, which may take longer to subside fully and restore the logistics network, pose downside risks to the growth and upside risks to inflation.
"If the conflict remains unresolved for a long duration, it can make the task of central banks arduous in their endeavour to rein in inflation expectations while minimising growth sacrifice," the minutes quoted Malhotra as saying.
MPC member and RBI Deputy Governor Poonam Gupta opined that under the circumstances, central banks need to continue to play a conducive role in supporting the productive requirements of the economy.
RBI Executive Director and rate-setting panel member Indranil Bhattacharyya noted that the global economic outlook, which was buoyant till the February MPC meeting, has deteriorated significantly after the outbreak of the West Asia conflict.
The consequent disruption in the logistics network has not only triggered a sharp increase in international energy prices, but it has also choked global trade flows, particularly those transiting through the Strait of Hormuz, which accounts for about half of India’s energy imports, he said.
While three members of the MPC are RBI officials, the other three are nominated by the government.
According to the minutes, Kumar said the April 2026 MPC meeting is taking place against the backdrop of the West Asia conflict, dramatically clouding the economic outlook for the global economy with significant spillovers for the Indian economic outlook for 2026-27.
At the time of the February 2026 MPC meeting, the outlook for the Indian economy seemed to have brightened considerably with the conclusion of the long-pending EU-India FTA negotiations on 27 January, the withdrawal of high Trump tariffs on exports to the US in February, and boosted by the Union Budget 2026-27 proposals, while inflation remained benign.
Bhattacharya said that despite tentative indications of a cessation of hostilities in the West Asia conflict and a consequent easing of tight global financial conditions, uncertainty regarding persisting dislocations of global supply chains remains heightened.
He further said monetary policy cannot influence energy prices, but can facilitate the process of economic adjustment in a way that sustainably achieves inflation targets.
"For me, the risks of a policy mistake have heightened amidst this uncertainty. Arguments for increasing the policy rate in anticipation of higher inflation are as risky as cutting rates in response to a fear of lower growth. Quantifying the glide path along a precise timeline is not an exact science," Bhattacharya added.
Ram Singh noted that the turmoil in the Strait of Hormuz is a drag on growth directly through oil supply disruptions and their effect on demand. This, along with disruptions in key shipping lines, has dampened the growth prospects of the global economy and Indian exports.
As of April 2026, the real GDP growth forecast for 2026-27 in Q1 is at 6.8 per cent, Q2 at 6.7 per cent, Q3 at 7.0 per cent, and Q4 at 7.2 per cent. The real GDP growth for 2026-27 is projected at 6.9 per cent, with downside risks increasing as the conflict persists.
"As per my assessment, the growth forecast is lower by 50-60 bps as of now due to the West Asia conflict," Singh said, as he voted in favour of the status quo on repo rate.