Crisil: Retail inflation in India would average 2.5% in the fiscal year 2025–2026

Crisil:  According to Crisil, headline Consumer Price Index or retail inflation is expected to modestly increase to an average of 2.5% in fiscal year 2025–2026 as the base impact on food fades.

“GST rate reduction will help core inflation, but poor global oil prices should continue to underpin fuel inflation. This fiscal year, we anticipate CPI inflation to average 2.5%, according to a letter from rating agency Crisil.

The slower rate of deflation in the food and beverage category, together with a pick-up in fuel and light inflation, caused the Consumer Price Index (CPI)-based inflation rate to accelerate from 0.3% in October to 0.7% in November.

When retail inflation rises, customers’ buying power declines, driving up the cost of items.

Although the food and beverage sector saw deflation for the third consecutive month, the rate of moderation decreased.

This was especially true in the food index, where deflation decreased from -5.0 percent to -3.9 percent as a result of vegetables and pulses seeing slower deflation as the base impact wears off.

In November, core inflation, excluding goldease, decreased somewhat once again (2.5% vs. 2.6%).

“It was helped by the continuing pass-through of lower GST rates on mass consumption goods,” Crisil said.

Following the December MPC meeting, RBI Governor Sanjay Malhotra described India’s present macroeconomic situation as a “rare goldilocks period” with unusually low inflation and strong economic growth.

Following a three-day review meeting that ended on December 5, the Reserve Bank issued its most recent monetary policy decision, lowering the repo rate by 25 basis points to 5.25 percent.

A widespread weakening across goods and services is shown by the fact that over 80% of the CPI basket is now showing inflation below 4%.

According to the RBI Governor, increased kharif production, a good rabi planting, and favorable commodity trends would likely keep inflation lower than previously anticipated.

The RBI lowered its CPI inflation prediction for 2025–2026 from earlier projections to only 2.0 percent. According to quarterly predictions, inflation will be 0.6% in Q3 and 2.9% in Q4 before increasing to 3.9% in Q1 2026–2027 and 4.0% in Q2, all of which are within the central bank’s goal range of 2–6%.