What is the Inflation Outlook for India in FY26?
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Synopsis
As India braces for FY26, a recent report forecasts an average inflation rate of 2.1 percent, influenced by subdued food prices and controlled demand pressures. This could lead to potential rate cuts from the RBI. Discover the implications for the economy and trade dynamics in this insightful analysis.
Key Takeaways
- The average inflation rate for FY26 is projected at 2.1 percent.
- Subdued food inflation and contained demand pressures influence this projection.
- Potential for RBI rate cuts if growth slows in H2 FY26.
- Global trade volumes expected to grow by 2.9 percent.
- India's exports to the US increased by 13 percent in H1 FY26.
New Delhi, Nov 12 (NationPress) The average inflation rate for the current financial year (FY26) is anticipated to be at 2.1 percent, attributed to low food inflation and controlled demand pressures, according to a recent report.
"From a monetary policy standpoint, if growth slows down in the second half of FY26, the recent inflation figures may open up the possibility for a rate reduction," stated CareEdge Ratings in their analysis.
The ratings agency has kept its FY26-end USD/INR projection at 85–87, influenced by a weaker dollar, a robust yuan, a manageable current account deficit (CAD), and discussions surrounding the US-India trade agreement.
The study further forecasts that global trade volumes will expand by approximately 2.9 percent on average during 2025-26.
Additionally, it referenced IMF predictions indicating that India’s goods and services exports may decline to around 16 percent of GDP by 2030, from the current 21 percent.
The report highlighted that the global growth forecast for 2025 was adjusted upward by 20 basis points, driven by trade frontloading and gradual adjustments to trade conflicts.
In summary, the risks to growth remain skewed towards the downside due to persistent uncertainty and increasing protectionism.
India’s non-petroleum exports saw a 7 percent increase in the first half of FY26, although petroleum exports negatively impacted overall growth. Imports experienced a modest 4.5 percent rise in H1 FY26, primarily driven by non-petroleum goods.
India’s exports to the United States surged by 13 percent in H1 FY26, confirming the US as the leading destination for Indian merchandise, comprising nearly 20 percent of total exports.
Among the key exports to the US, all commodities, except for electronic goods and petroleum products, saw a decline in September, as mentioned in the report.
Point of View
It is crucial to highlight the balanced nature of the report on India's inflation and trade. Despite positive growth in non-petroleum exports, the persistent global uncertainties and protectionist tendencies demand careful monitoring. Our commitment is to provide an unbiased perspective that empowers our readers with the knowledge they need to navigate these economic challenges.
NationPress
12/11/2025
Frequently Asked Questions
What is the expected inflation rate for India in FY26?
The expected inflation rate for India in FY26 is projected to be 2.1 percent, driven by subdued food inflation and controlled demand.
What factors could lead to a rate cut by the RBI?
A slowdown in growth during the second half of FY26 coupled with the recent inflation readings could prompt the RBI to consider a rate cut.
How have India's exports performed recently?
India's non-petroleum exports increased by 7 percent in H1 FY26, while overall exports to the US rose by 13 percent.
What is the forecast for global trade volumes?
Global trade volumes are expected to grow at an average rate of 2.9 percent during the 2025-26 period.
What are the implications of the current account deficit?
The manageable current account deficit (CAD) supports the stability of the INR and is a positive indicator amidst global trade dynamics.
