Will India’s Inflation Average 4% This Fiscal Year and Is Another RBI Rate Cut Imminent?
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Synopsis
As inflation trends shift, a recent Crisil report predicts India's headline inflation may average 4% this fiscal year, down from 4.6%. With food and fuel prices moderating, the RBI may consider another rate cut. Explore the potential economic impacts and agricultural forecasts in our latest analysis.
Key Takeaways
- Projected average inflation for FY26 is 4%.
- Potential for one more RBI rate cut.
- Food inflation has dropped to 1%.
- Record wheat production expected from the rabi harvest.
- Brent crude prices likely to remain between $65-$70.
New Delhi, June 13 (NationPress) Analyzing the current inflation trends, the headline inflation is expected to average 4 percent for this fiscal year (FY26), a decline from 4.6 percent recorded in the previous fiscal, according to a report by Crisil released on Friday.
This decrease in inflation paves the way for potentially one more repo rate cut by the Reserve Bank of India (RBI), in addition to the 100 basis points cut already implemented, the report indicated.
In May, the Consumer Price Index (CPI)-based inflation fell to 2.8 percent, marking the lowest rate since February 2019, down from 3.2 percent in April, primarily due to a decline in food inflation.
Both fuel and core inflation have also eased. Food inflation dropped to 1 percent, the lowest since October 2021, down from 1.8 percent in April. Fuel inflation nudged down to 2.8 percent from 2.9 percent.
Core inflation saw a slight decrease to 4.18 percent from 4.23 percent in April, remaining below its trend level, which is typically 4.9 percent.
Deflation was noted in food items such as pulses, vegetables, and spices, while inflation in cereals diminished.
As reported by Crisil Intelligence—Research’s Thali Index released last week, the prices of both vegetarian and non-vegetarian thalis in May experienced a 6 percent year-on-year decline, largely attributed to falling vegetable prices.
The Ministry of Agriculture’s Third Advance Estimates point towards a strong rabi harvest, with wheat production hitting record levels.
“The India Meteorological Department (IMD) predicts an above-normal monsoon at 106 percent of the long-period average (LPA), which is expected to positively influence the upcoming kharif season,” the report stated.
Both factors are likely to keep food inflation stable this fiscal year, assuming no disruptions in the monsoon. Despite a slowdown in June, with an all-India cumulative rainfall deficiency of 34 percent of LPA, the critical rains for kharif crops will occur in July and August.
Regarding the energy sector, provided there are no significant geopolitical disruptions, Brent crude oil prices are projected to remain steady, fluctuating between $65 and $70 per barrel throughout the calendar year, which should help maintain non-food inflation in check, as per the report.
Point of View
It is crucial to recognize the implications of fluctuating inflation rates on the economy. The forecast of a 4% average inflation provides a hopeful outlook for consumers and businesses alike. With the RBI potentially poised for further rate cuts, the focus remains on the stability of food prices and the overall economic recovery. This situation demands attention as we monitor agricultural performance and global energy trends.
NationPress
14/06/2025
Frequently Asked Questions
What is the projected inflation rate for India this fiscal year?
According to Crisil, the projected inflation rate for India this fiscal year is expected to average 4%.
Will there be another RBI rate cut?
Yes, the report suggests that the Reserve Bank of India may consider another repo rate cut in light of the declining inflation rates.
What factors are influencing food inflation?
Food inflation is influenced by lower prices in commodities like vegetables, pulses, and cereals, along with a robust agricultural forecast.
How does the monsoon affect inflation?
The monsoon plays a vital role in agricultural production, and its performance can significantly affect food inflation and overall economic stability.
What are the projected Brent crude oil prices?
The report indicates that Brent crude oil prices are expected to remain between $65 and $70 per barrel for this calendar year.
