The Reserve Bank of India (RBI) on Friday kept the benchmark repo rate unchanged at 5.25 per cent, as the Monetary Policy Committee lead by Governor Sanjay Malhotra weighed mounting inflation risks from elevated crude oil prices, a weakening rupee, and concerns over a below-normal monsoon against the need to support economic growth.The decision, announced by RBI Governor Sanjay Malhotra after the three-day meeting of the Monetary Policy Committee (MPC), comes amid growing uncertainty triggered by the West Asia conflict, rising energy costs and renewed pressure on India's external sector. The central bank's policy stance and revised inflation and growth projections will be closely scrutinised for clues on the future rate trajectory.Ahead of the policy announcement, economists were largely expecting the MPC to remain on hold. Eleven of the 15 economists surveyed by ET anticipated no change in the repo rate, with State Bank of India Chairman CS Setty saying a pause would help "stabilize in terms of ensuring that the smooth growth rates are achieved."A separate Reuters poll conducted between May 22 and May 29 showed nearly 80 per cent of economists, or 44 of 56 respondents, expecting the MPC to leave the benchmark repo rate unchanged at 5.25 per cent.The RBI entered the June policy review facing a difficult balancing act. Retail inflation stood at 3.48 per cent in April, remaining just below the central bank's medium-term target of 4 per cent. At the same time, wholesale inflation accelerated sharply to 8.3% in April, global crude prices remain elevated, and the rupee has weakened significantly amid foreign capital outflows and geopolitical tensions.Many economists had expected the central bank to revise upward its inflation forecast from the 4.6 per cent projected in April while trimming its growth estimate of 6.9 per cent for FY27. Analysts at Citi projected inflation could rise to 4.9 per cent while GDP growth could slow to 6.6 per cent due to higher oil prices and weaker monsoon prospects.Finance ministry flags inflation risksJust days before the RBI's policy decision, the finance ministry warned that policymakers needed to remain vigilant as multiple factors threatened to reignite inflationary pressures.In its May economic review, the Department of Economic Affairs described the economy as "cautiously resilient" but cautioned that rising fuel prices, a depreciating rupee, increasing upstream cost pressures and the prospect of below-normal monsoon rainfall posed significant risks."The confluence of elevated global energy prices, a depreciating rupee, rising upstream cost pressures and the prospect of a below-normal monsoon calls for sustained policy vigilance," the ministry said.The review also stressed that policymakers would need to remain "agile across monetary, fiscal, and structural dimensions" to navigate what it described as a period of "compounded uncertainty, external and climatic, while keeping medium-term growth objectives firmly in view."West Asia war clouds inflation and growth outlookThe conflict in West Asia has emerged as one of the biggest risks confronting the RBI and the broader economy.India imports nearly 90 per cent of its crude oil requirements, making it particularly vulnerable to sustained disruptions in global energy markets. Since the outbreak of the Iran conflict earlier this year, crude prices have remained significantly above pre-conflict levels, increasing pressure on inflation, the fiscal position and the current account balance.The finance ministry identified disruption to shipping through the Strait of Hormuz as the most critical variable for India's economic outlook."The duration of the Strait of Hormuz disruption remains the 'single most consequential variable for India's external and price outlook'," the ministry said.Economists have warned that prolonged elevated oil prices could force a reassessment of the inflation outlook. While many believe supply-driven inflation does not warrant an immediate rate response, a sustained pass-through of fuel and transportation costs into broader consumer prices could eventually compel policy action.The RBI itself, in its latest annual report, acknowledged that a prolonged West Asia conflict could pose downside risks to growth while simultaneously creating upside risks for inflation through higher global fuel and commodity prices.The sharp weakening of the rupee added another layer of complexity to the RBI's policy calculus.The Indian currency touched record lows against the US dollar earlier this year and remains among Asia's weaker-performing currencies amid foreign fund outflows and higher oil import bills.Rupee has declined more than 5 per cent this year, prompting the RBI to spend billions of dollars intervening in the foreign exchange market to curb volatility.