Synopsis
A Crisil report forecasts that India's CPI inflation will average 4.3% for FY26, driven by controlled food inflation at 4.6%, fuel at 2.5%, and core inflation at 4.2%. The report highlights potential challenges from weather-related disruptions.Key Takeaways
- India's CPI inflation expected at 4.3%
- Food inflation projected at 4.6%
- Fuel inflation predicted at 2.5%
- Core inflation expected to be 4.2%
- RBI likely to cut rates further
New Delhi, April 16 (NationPress) A report by Crisil released on Wednesday forecasts that India's CPI inflation will average 4.3 percent during this fiscal year (FY26), with food, fuel, and core inflation projected at 4.6 percent, 2.5 percent, and 4.2 percent respectively.
This fiscal year, the report indicates that food inflation is likely to remain manageable, supported by strong rabi sowing, declining global food prices, and an anticipated above-normal monsoon.
The elevated base from last year is expected to exert a downward (statistical) influence on food inflation. The Indian Meteorological Department has forecasted a favorable monsoon, which should positively impact the kharif crop.
“We predict that non-food inflation will stay within a comfortable range, given the expectation of stable global commodity prices,” the Crisil report stated.
Nevertheless, vigilance is necessary regarding potential heat waves and other weather-related challenges.
The report also anticipates that the Reserve Bank of India (RBI) will reduce rates at least twice more by 25 basis points each this fiscal year due to subdued inflation alongside increasing risks to growth. It is projected that lower interest rates and a controlled fiscal deficit will reduce the yield on the 10-year government security to 6.4 percent by March 2026, down from 6.7 percent in March 2025.
For fiscal year 2025, the headline inflation decreased to 4.6 percent from 5.4 percent in fiscal year 2024. This decline was primarily driven by a record low core inflation of 3.5 percent (compared to 4.3 percent in fiscal year 2024), even though food inflation remained high and volatile at 7.3 percent (versus 7.5 percent).
However, the fourth quarter saw a trend reversal, with non-food inflation increasing while food inflation fell sharply.
The March inflation figure of 3.3 percent provides reassurance to policymakers amid growing concerns about growth, according to the report.
Food inflation decreased to 2.7 percent, down from 3.7 percent in February, influenced by lower prices of vegetables and pulses. This winter season, vegetable prices dropped significantly, contributing to the recent decline in food inflation.
