RBI Revises Inflation Projection to 4% for 2025-26
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Synopsis
The Reserve Bank has revised its inflation forecast for 2025-26 to 4%, down from 4.2%, due to a positive outlook on food inflation, as stated by RBI Governor Sanjay Malhotra. Key factors include reduced uncertainties around crop production and declining crude oil prices, though global market risks persist.
Key Takeaways
- The RBI has cut its inflation forecast to 4% for 2025-26.
- The previous estimate was 4.2%.
- Food inflation outlook is decisively positive.
- Record wheat production is expected this year.
- Global uncertainties still pose risks to inflation.
Mumbai, April 9 (NationPress) The Monetary Policy Committee of the Reserve Bank has adjusted its inflation forecast for the financial year 2025-26, lowering it to 4 percent from the previous 4.2 percent, as the prospects for food inflation have shown a significantly positive trend, as stated by RBI Governor Sanjay Malhotra on Wednesday.
According to him, headline inflation saw a decline during January-February 2025, following a notable drop in food inflation. The outlook for food prices has turned notably favorable. The uncertainties surrounding the Rabi crops have diminished significantly, with second advance estimates indicating record wheat production and increased output of vital pulses compared to last year.
He noted that in conjunction with strong Kharif arrivals, this situation is anticipated to pave the way for a lasting decrease in food inflation.
“The significant drop in inflation expectations from our recent survey for three months and one year ahead will also contribute to stabilizing inflation expectations in the future,” he emphasized.
Additionally, the decrease in crude oil prices is promising for the inflation forecast. However, lingering global market uncertainties and the potential for adverse weather-related supply disruptions pose risks to the inflation outlook, as stated by the RBI Governor.
He mentioned that considering all these factors, and assuming a typical monsoon, the Consumer Price Index (CPI) inflation for the fiscal year 2025-26 is estimated at 4.0 percent, with Q1 at 3.6 percent; Q2 at 3.9 percent; Q3 at 3.8 percent; and Q4 at 4.4 percent. He also views the risks as balanced.
Malhotra further remarked that the global economy is currently facing extraordinary uncertainties.
The challenge of deciphering clear signals from a chaotic and uncertain landscape complicates policy-making. Nevertheless, he stated that monetary policy can serve an essential role in maintaining economic stability.
He emphasized that the domestic growth-inflation landscape necessitates a monetary policy that supports growth while remaining vigilant regarding inflation.
“Our goal is to achieve non-inflationary growth based on enhanced demand and supply responsiveness, along with sustained macroeconomic equilibrium,” Malhotra added.
The RBI will continue to be proactive and decisive in its actions, implementing policies that are clear, consistent, credible, and in the best interests of the economy, he concluded.
