While food inflation normalization could push CPI higher, counterbalancing forces like subdued crude oil costs and early-year GST cuts should restrain non-food inflation. This scenario paints a picture of controlled inflationary pressures, allowing the central bank room to hold steady.

Growth prospects remain resilient, with GDP growth estimated at 6.7% for FY27 under the 2011-12 series. Potential deflator increases might temper real growth, yet government capex thrust and private sector investment revival are poised to drive momentum.

External tailwinds are equally encouraging. The rupee’s resilience has been bolstered by potential US-India trade pacts and FPI repatriation signals. Projections indicate the currency stabilizing at 89 to the dollar by March 2027.

February has seen FPIs inject a net $2.8 billion as of February 16, strengthening the rupee from late January’s 92 levels to 90.7. This influx has significantly alleviated currency pressures.

Policy rate stability doesn’t imply inaction; prior hikes’ transmission will sustain higher interest rates in the real economy. The Crisil FCI at -0.5 in January reflects marginally tight financial conditions, moderated by RBI’s proactive measures.

Through OMOs and forex swaps, the RBI has ensured adequate liquidity. The easing cycle’s 125 bps cuts have reduced loan rates, spurring credit expansion and underpinning economic recovery in a steady trajectory.