India's central bank holds interest rates steady amid iran conflict risks

The Reserve Bank of India has maintained its benchmark interest rate at 5.25%, citing strong economic growth as a buffer against inflationary pressures from the ongoing Iran conflict.

India's central bank weighs risks of middle east war on growth and prices

Consumer inflation in India jumped for a fourth straight month in February, rising to 3.21% from 2.75% previously. However, the RBI governor Sanjay Malhotra stated that the country's food price outlook remains 'comfortable in the near term', while acknowledging the threat posed by surging energy costs.

India's economy has been buoyed by robust growth, expanding at a higher-than-expected 7.8% in the December quarter, making it the world's fastest-growing large economy. However, the ongoing conflict in the Middle East, which began on February 28, poses significant risks to this momentum.

India's Chief Economic Advisor V. Anantha Nageswaran warned last month that the country's growth forecast of 7.0%-7.4% for the fiscal year ending March 2027 faces 'considerable downside' risk due to rising energy costs and supply chain disruptions linked to the war.

The conflict has disrupted the movement of goods through the Strait of Hormuz, a critical waterway that carries 20% of global oil, driving up energy and freight costs and straining supply chains. This has led to a slowdown in private sector activity in March, according to HSBC's flash Purchasing Managers' Index, with companies citing the Middle East war, unstable market conditions, and inflationary pressures as dampening growth.