Mumbai, Dec 5 (NationPress) The RBI’s monetary policy committee (MPC) made a significant reduction in its forecast for India’s inflation rate for the financial year 2025-26, adjusting it to 2 percent from the previously estimated 2.6 percent in October. This revision is attributed to a notable drop in food prices and the implementation of GST rate cuts.

According to RBI Governor Sanjay Malhotra, “the MPC observed that headline inflation has considerably eased and is anticipated to be lower than earlier forecasts, largely due to exceptionally low food prices. In light of these positive developments, the average headline inflation projections for 2025-26 and the first quarter of 2026-27 have been revised downwards.”

Malhotra highlighted that core inflation (which excludes food and fuel) has remained quite stable in September and October, despite ongoing price pressures from precious metals. Excluding gold, core inflation decreased to 2.6 percent in October. The overall reduction in inflation has become more widespread, he noted.

The RBI Governor remarked that food supply conditions have improved thanks to increased kharif production, healthy rabi sowing, adequate reservoir levels, and favorable soil moisture. Aside from a few metals, international commodity prices are expected to decrease further.

“In conclusion, inflation is expected to be softer than what was previously projected in October, primarily due to falling food prices. Taking all these factors into account, CPI inflation for 2025-26 is now anticipated to be at 2.0 percent, with Q3 at 0.6 percent and Q4 at 2.9 percent. CPI inflation for Q1 2026-27 and Q2 is projected at 3.9 percent and 4.0 percent, respectively. The underlying inflation pressures are even lower as the effect of rising precious metal prices is about 50 bps. The risks are evenly balanced,” Malhotra underscored.

He elaborated that core inflation, which had been increasing steadily since Q1 2024-25, eased slightly in Q2 2025-26 and is expected to remain steady in the future. Both headline and core inflation are projected to be at or below the 4 percent target during the first half of 2026-27. The underlying inflation pressures are even lower since the impact of precious metals price increase is around 50 basis points. While growth remains robust, a slight softening is anticipated.

“Thus, the balance between growth and inflation, particularly with the favorable outlook for both headline and core inflation, continues to provide the policy space needed to support growth momentum. Consequently, the MPC unanimously voted to lower the policy repo rate by 25 bps to 5.25 percent,” Malhotra concluded.

He noted that headline CPI inflation hit an all-time low in October 2025. The faster-than-expected decline in inflation was primarily driven by a correction in food prices, contrary to the usual trends seen during September and October.