RBI raises crude oil forecast to $95 per barrel; what it means for India

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said the central bank expects foreign currency inflows to remain healthy in the coming months, supported by measures announced as part of the latest monetary policy review.

The comments came shortly after the RBI kept the repo rate unchanged at 5.25 per cent and unveiled a set of steps aimed at attracting overseas funds and strengthening foreign exchange liquidity.

"We are hopeful of reasonable and healthy dollar inflows. We are not targeting any particular number," Malhotra said while briefing reporters after the policy announcement.

RBI banking on ECBs and other inflow measures

The Governor said the RBI expects foreign currency inflows to be supported by external commercial borrowings (ECBs) and other initiatives announced on Friday.

The central bank has introduced a concessional foreign exchange swap facility for public sector undertakings raising funds through ECBs. It has also offered a special facility for banks mobilising NRI deposits, under which the RBI will bear the hedging cost on select deposits until September 30.

According to the Governor, these measures are expected to help bring additional foreign currency into the financial system.

"We expect a reasonable quantum of flows through ECBs and other measures announced today," he said.

Crude oil outlook revised upward

Malhotra also said the RBI has revised its assumption for crude oil prices to $95 per barrel from the earlier estimate of $85 per barrel.

The revision comes amid rising uncertainty in global energy markets following geopolitical tensions in West Asia.

Higher crude oil prices remain a key concern for India, which imports a large part of its energy requirements. Any sustained increase in oil prices can have implications for inflation, the current account balance and economic growth.

Repo rate left unchanged

Earlier in the day, the six-member Monetary Policy Committee unanimously voted to keep the benchmark repo rate unchanged at 5.25 per cent.

The RBI also retained its neutral stance, indicating that future policy decisions will depend on incoming economic data and evolving global conditions.

The decision was largely in line with market expectations.

Global uncertainties remain

Malhotra said the global economic environment continues to face challenges due to geopolitical developments, including the ongoing conflict involving Iran and tensions in the broader West Asian region.

Despite these risks, he said India's economy remains well placed to deal with external shocks.

The Governor noted that domestic macroeconomic fundamentals continue to provide stability even as uncertainties persist across global markets.

Monsoon remains a key watchpoint

Apart from global risks, the RBI flagged weather conditions as an important factor for the economy.

Malhotra said a weak monsoon could affect agricultural output, rural demand and food prices, creating risks for both growth and inflation.

However, he added that comfortable foodgrain stocks currently available in the country provide a cushion against supply-side disruptions and help limit inflationary pressures.

Focus on strengthening external position

The RBI's latest measures reflect its efforts to bolster foreign exchange inflows at a time when the rupee has been facing pressure from global factors, including higher oil prices and uncertainty in international markets.

Economists said the combination of incentives for ECBs, support for NRI deposits and steps to attract overseas capital could help improve foreign currency liquidity and strengthen India's external position.