According to a recent report by Crisil, a ratings agency, the outlook for India’s retail inflation has improved significantly. The agency has revised its projection for headline Consumer Price Index (CPI) inflation for fiscal 2026, lowering it to 3.2% from its earlier estimate of 3.5%. This represents a substantial decline of almost 140 basis points from the previous year.
Crisil attributes this moderation in inflation to several key factors. Firstly, lower crude prices have contributed to the easing of inflationary pressures. Additionally, healthy kharif sowing, which refers to the planting of crops during the monsoon season, is expected to lead to a bountiful harvest and thereby reduce food prices. Furthermore, the impact of Goods and Services Tax (GST) rate cuts is also seen as a contributing factor to the decline in inflation.
The agency believes that this improved inflation trajectory could have significant implications for monetary policy. Specifically, Crisil suggests that the Reserve Bank of India (RBI) may consider another 25-basis-point rate cut this year. This would be a welcome move for consumers and businesses, as lower interest rates can help stimulate economic growth and reduce borrowing costs.
The decline in inflation is a positive development for India’s economy, as it suggests that prices are rising at a slower pace, making goods and services more affordable for consumers. The combination of lower crude prices, healthy agricultural production, and GST rate cuts has created a favorable environment for price stability. As a result, the RBI may feel more comfortable cutting interest rates to support economic growth, without worrying about fuelling inflation.
Overall, Crisil’s report suggests that India’s retail inflation is on a downward trajectory, driven by a combination of factors. The agency’s projection of 3.2% CPI inflation for fiscal 2026 is a significant improvement from its earlier estimate, and could lead to further monetary policy easing by the RBI. This development is likely to have positive implications for India’s economy, and could help support growth and stability in the coming year.