What is RBI's CPI inflation projection for India at 3.1 pc for FY26?
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Synopsis
The Reserve Bank of India forecasts CPI inflation at 3.1% for FY2025-26, supported by favorable monsoon conditions and healthy kharif sowing. As food prices stabilize, inflation may rise above 4% later in the year, posing challenges ahead. Read on to explore these insights.
Key Takeaways
- RBI projects CPI inflation at 3.1% for FY2025-26.
- Food prices expected to remain stable due to favorable monsoon and kharif sowing.
- Inflation may rise above 4% later in the fiscal year.
- Weather-related shocks could impact inflation outlook.
- Core inflation remained moderately above 4% during the year.
Mumbai, Aug 6 (NationPress) The Reserve Bank of India (RBI) has recently projected India’s CPI inflation at 3.1 percent for the fiscal year 2025-26. This optimistic outlook is attributed to the consistent advancement of the monsoon and vigorous kharif sowing, which are anticipated to maintain food prices at manageable levels.
According to RBI Governor Sanjay Malhotra, “The inflation forecast for 2025-26 appears more favorable than earlier predictions made in June. Significant base effects, the steady progress of the southwest monsoon, robust kharif sowing, sufficient reservoir levels, and adequate buffer stocks of food grains have all led to this easing.”
However, CPI inflation is expected to surpass 4 percent in the fourth quarter of 2025-26 and beyond, influenced by adverse base effects and demand-side factors stemming from policy actions. Unless there are significant negative shocks to input prices, core inflation should remain moderately above 4 percent throughout the year, he clarified.
Nonetheless, potential weather-related disturbances could pose risks to the inflation forecast. Taking these elements into account, the CPI inflation for 2025-26 is now estimated at 3.1 percent, with projections of 2.1 percent for Q2, 3.1 percent for Q3, and 4.4 percent for Q4. The CPI inflation for the first quarter of 2026-27 is anticipated to be 4.9 percent. The risks appear to be evenly distributed, Malhotra added.
In June 2025, CPI headline inflation dropped to a 77-month low of 2.1 percent (YoY) for the eighth consecutive month, primarily due to a substantial decrease in food inflation, driven by improved agricultural activity and various supply-side interventions. Food inflation recorded its first negative value since February 2019 at (-) 0.2 percent in June.
RBI Governor Malhotra further noted that high-frequency price indicators suggest a continuation of the lower price trend in food items through July this year. Core inflation, which fluctuated within a narrow range of 4.1-4.2 percent from February to May, rose to 4.4 percent in June, partly due to the persistent increase in gold prices.
Point of View
It is essential to recognize the RBI's cautious optimism regarding inflation. While favorable agricultural conditions are encouraging, the potential for unforeseen weather-related shocks underscores the need for vigilance in economic policy to sustain stability.
NationPress
08/09/2025
Frequently Asked Questions
What is the projected CPI inflation for India in FY2025-26?
The RBI has projected India's CPI inflation at 3.1% for FY2025-26.
What factors contribute to the CPI inflation forecast?
The forecast is influenced by the progress of the monsoon, healthy kharif sowing, and adequate food grain stocks.
When is CPI inflation expected to rise above 4%?
CPI inflation is likely to exceed 4% in the fourth quarter of FY2025-26.
What risks could affect the inflation outlook?
Weather-related shocks pose a risk to the inflation outlook.
What was the CPI inflation rate in June 2025?
CPI headline inflation declined to a 77-month low of 2.1% in June 2025.
