RBI Steps Boost Rupee Outlook, Rate Hike Risks Rise : HDFC Bank

Ahmedabad | Gujarat — The Reserve Bank of India’s latest monetary policy, coupled with coordinated government measures to attract foreign capital, could provide significant support to the Indian rupee and help bridge a key balance-of-payments gap, according to HDFC Bank Principal Economist Sakshi Gupta.

In an assessment of the RBI’s Monetary Policy Committee (MPC) decisions, Gupta said the central bank and the government have jointly acted to shore up capital inflows into Indian financial assets at a time when the rupee faces external pressures.

“The RBI and government today delivered on a coordinated effort towards shoring up capital flows into Indian assets to ease the pressure on the rupee,” Gupta said. She noted that the measures include both short-term interventions and structural reforms, including changes in taxation on foreign portfolio investor (FPI) investments in government securities.

According to HDFC Bank estimates, the combined impact of these measures could help bridge a $40-50 billion gap in India’s balance of payments projected for FY27. “We see an appreciation bias likely for the rupee over the coming months as the actual flows on account of these measures start trickling in,” Gupta added.

The policy statement also highlighted concerns over economic growth and inflation. While the RBI acknowledged downside risks to growth stemming from supply chain disruptions and rising price pressures, it simultaneously revised its FY27 inflation forecast upward by 50 basis points to 5.1%.

“This raises the likelihood of the rate hike cycle beginning by the October policy,” Gupta said, adding that HDFC Bank expects a cumulative 50 basis points increase in interest rates during FY27.

The commentary signals that while policymakers are focused on stabilising the currency and attracting investment, inflation remains a growing concern that could shape the RBI’s policy trajectory in the months ahead.