Following its April 2026 Monetary Policy meeting, the Reserve Bank of India (RBI) has significantly adjusted its baseline economic assumptions for the 2026-27 fiscal year (FY27). These changes reflect the central bank’s response to heightened geopolitical risks and the resulting pressure on global energy and currency markets.
Baseline Adjustments for FY27
The RBI uses these “baseline assumptions” to forecast inflation and GDP growth. The upward revisions indicate a more cautious outlook on the external sector.
| Indicator | Previous Baseline (H2 FY26) | New Baseline (FY27) |
| Crude Oil (Brent) | $70 per barrel | $85 per barrel |
| Exchange Rate (INR/USD) | 88 against the Dollar | 94 against the Dollar |
Key Drivers of the Revision
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Geopolitical Volatility: The RBI noted that after a period of relative calm in late 2025, oil prices surged past $100 per barrel in March 2026 due to escalating conflict in West Asia. While a recent “two-week ceasefire” has cooled prices slightly, the long-term outlook remains elevated.
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Currency Pressure: The Indian Rupee (INR) faced its sharpest annual decline in 14 years during FY26, depreciating by nearly 9.9%. This was driven by massive foreign portfolio outflows ($16.6 billion) and a strengthening US Dollar.
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Imported Inflation: By raising the baseline exchange rate to 94, the RBI is acknowledging that a weaker rupee makes imports (especially oil) more expensive, which could add roughly 50 basis points to headline inflation if sustained.
The Outlook for FY28
Interestingly, the RBI’s projections suggest a potential “cooling off” period beyond next year. The report takes a baseline assumption of $75 per barrel for FY28, signaling an expectation that supply chains and geopolitical tensions might stabilize in the medium term.
Economic Impact at a Glance
Growth vs. Inflation: The RBI warned that if crude oil remains 10% above their new $85 baseline, it could shave 15 basis points off India’s GDP growth while simultaneously pushing up consumer prices.
Despite these headwinds, the RBI maintained its 7.2% GDP growth forecast for FY27, banking on strong domestic demand to offset external shocks.
