In light of ongoing geopolitical tensions, particularly the Gulf war, the Reserve Bank of India (RBI) has opted to maintain the repo rate at 5.25%. This decision comes as the RBI assesses the potential economic impacts of the conflict, which has already disrupted global supply chains. The RBI's inflation forecast has been adjusted to 4.6% for the fiscal year 2026-27, up from 4.2%, primarily due to supply chain disruptions. Additionally, GDP growth is expected to decrease to 6.9%, down from 7.6% the previous year, reflecting a cautious outlook on economic expansion. Despite these challenges, the RBI noted that rural and urban demand remains strong, supported by favorable agricultural conditions and a boost from the previous year's Goods and Services Tax (GST) reset. However, uncertainties such as the potential impact of El Niño on agricultural output and fluctuating crude oil prices pose risks to inflation and overall economic stability. The RBI's approach focuses on stabilizing the rupee and managing inflation without targeting a specific currency level, indicating a flexible policy stance as global conditions evolve.