India's retail inflation predicted to average 2.5% in FY26: Crisil
What's the story
Crisil, a leading rating agency, has projected that India's retail inflation will average around 2.5% in the fiscal year 2025-26. The prediction comes as the base effect on food prices is expected to fade. "While weak global crude prices should continue anchoring fuel inflation, GST rate cuts will support core inflation," Crisil said in a note.
Inflation increase
CPI inflation rises to 0.7% in November
The Consumer Price Index (CPI)-based inflation rose to 0.7% in November, up from 0.3% in October. This was mainly due to a slower pace of deflation in the food and beverages category as well as an increase in fuel and light inflation. A rise in retail inflation decreases consumer purchasing power, making goods more expensive for the average Indian citizen.
Deflation moderation
Food and beverages deflation slows down
Deflation in the food and beverages category has continued for the third month in a row. However, the pace of moderation has slowed down, especially in the food index. Here, deflation narrowed to -3.9% from -5.0%, owing to a slowdown in vegetable and pulse deflation as the base effect fades away.
Inflation easing
Core inflation eases slightly in November
Core inflation, which excludes gold, eased slightly again in November to 2.5% from 2.6%. "It was helped by the continuing pass-through of lower GST rates on mass consumption goods," Crisil noted. This indicates that the government's efforts to cut GST rates on essential goods are having a positive impact on controlling inflation levels in India.
Economic outlook
RBI governor's remarks on India's economic situation
RBI Governor Shaktikanta Das, after the December Monetary Policy Committee (MPC) meeting, described India's current macroeconomic situation as a "rare goldilocks period." He said this period is characterized by high economic growth and very low inflation. His comments came as the Reserve Bank of India (RBI) announced its latest monetary policy decision of cutting the repo rate by 25 basis points to 5.25%.
Forecast revision
Revised CPI inflation forecast for 2025-26
The RBI has revised its CPI inflation forecast for 2025-26 to just 2.0%, down from earlier estimates. The quarterly forecasts indicate inflation at 0.6% in Q3 and 2.9% in Q4, before rising to 3.9% in Q1 of FY27 and further to 4.0% in Q2, remaining within the central bank's target range of 2-6%.