RBI Rate Hike Pivot Likely in FY27 Amid Global Tensions, Inflation Surge

• Global environment shifts with intensifying West Asian geopolitical tensions, driving energy price surges and inflation concerns.
• Unlike past episodes, a critical chokepoint for global energy flows is physically disrupted, impacting crude prices and global GDP.
• India's inflation cycle is turning up, with FY27 expected to mark normalization due to unfavorable food base, El Nino risks, and global energy price hikes.
• The RBI is projected to remain on hold in April with a neutral stance, but 50 bps rate hikes are anticipated in FY27 if high energy prices persist.
• India faces a weaker Balance of Payments, vulnerable rupee, and rising fiscal risks from fuel excise cuts and potential subsidy increases.