The Reserve Bank of India (RBI) is anticipated to maintain the current repo rate in its upcoming June monetary policy meeting, according to a recent report by SBI Research. While the central bank is expected to pause hikes, it will likely monitor economic data closely and rely on short-term rate adjustments and market operations to manage currency pressures.

SBI's analysis suggests that although inflation remains above the RBI’s comfort zone for several upcoming quarters, the central bank can employ tools like operation twist to influence the market microstructure without altering benchmark rates. The report forecasts India’s GDP growth to moderate to 6.6 percent for the fiscal year 2027, reflecting uncertainties from global geopolitical tensions and domestic economic dynamics.

Growth momentum remains strong currently, with SBI estimating real GDP expansion of around 7.2 percent in the last quarter of FY26 and an overall FY26 GDP growth close to 7.5 percent. Inflation measured by the Consumer Price Index (CPI) is expected to hover above 5 percent for the next three quarters, higher than the current quarter’s 4.0 to 4.1 percent, signaling upside risks in price stability.

Despite robust macroeconomic fundamentals, the Indian rupee has depreciated more sharply than many other currencies. This has prompted calls within the report for intensified intervention by the RBI to prevent excessive volatility in the foreign exchange market. India’s foreign exchange reserves remain adequate to support such measures, aiming to stabilize the currency while avoiding disruptive swings.

Geopolitical tensions, particularly in West Asia, contribute ongoing uncertainty to the economic outlook. The report highlights the elevated risk premium that affects crude oil prices, which could remain above $90 per barrel for much of 2026. This sustained high oil price environment puts pressure on domestic fuel prices and government finances, prompting the recommendation that excise duties on diesel and petrol may need to be cut by a specific amount to offset losses faced by oil marketing companies, or alternatively, fuel prices could see further incremental rises.