India's inflation to fall to 3.2% in FY26: Crisil
What's the story
India's headline inflation is expected to moderate to 3.2% in the fiscal year 2025-26, according to a report by research and ratings firm Crisil. The projection is an improvement from its previous estimate of 3.5%. The moderation could pave the way for a potential rate cut by the Reserve Bank of India (RBI) later this year, possibly by another 25 basis points (bps).
Monetary easing
Potential for monetary easing
Crisil's latest report highlights a 140 bps decline in Consumer Price Index (CPI) inflation for the current financial year. This decline could create room for monetary easing by the RBI. The firm also anticipates that lower inflation and interest rates will boost domestic demand in the economy, especially as global headwinds continue to mount.
Food production risk
Concerns over food production
The report also cautions about the impact of excessive rains during the kharif season on food production. It could disrupt key horticulture and foodgrain-growing regions such as Punjab, which is currently battling its worst floods in four decades. CPI inflation rose slightly to 2.1% in August from July's 1.6%, crossing RBI's tolerance threshold of 2%.