New Delhi [India]: As the base effect on food fades, headline Consumer Price Index or retail inflation is likely to edge up slightly to average at 2.5 per cent this financial year 2025-26, Crisil has asserted.
“While weak global crude prices should continue anchoring fuel inflation, GST rate cuts will support core inflation. We expect CPI inflation to average 2.5 per cent this fiscal,” rating agency Crisil said in a note.
Inflation based on the Consumer Price Index (CPI) quickened to 0.7 per cent in November from 0.3 per cent in October, driven by the slower pace of deflation in the food and beverages category and a pick-up in fuel and light inflation.
An increase in retail inflation reduces consumers’ purchasing power, making goods costlier.
While deflation in the food and beverages category continued for the third straight month, the magnitude of the moderation slowed.
This was particularly in the food index, where deflation narrowed to -3.9 per cent from -5.0 per cent, due to slowing deflation in vegetables and pulses as the base effect fades out.
Core inflation excluding gold–eased slightly again in November (2.5 per cent vs 2.6 per cent).
“It was helped by the continuing pass-through of lower GST rates on mass consumption goods,” Crisil noted.
RBI Governor Sanjay Malhotra, after the December MPC meeting, characterised India’s current macroeconomic moment as a “rare goldilocks period”, that marks high economic growth and exceptionally low inflation.
The remarks came as the Reserve Bank announced its latest monetary policy decision, cutting the repo rate by 25 basis points to 5.25 per cent, after the three-day review meeting that concluded December 5.
Nearly 80 per cent of the CPI basket is now recording inflation below 4 per cent, pointing to a broad-based softening across goods and services.
The RBI Governor had asserted that inflation is likely to remain softer than earlier projected, supported by higher kharif output, healthy rabi sowing, and favourable commodity trends.
The RBI revised its CPI inflation forecast for 2025-26 to just 2.0 per cent, down from previous estimates. Quarterly projections show inflation at 0.6 per cent in Q3 and 2.9 per cent in Q4, before rising to 3.9 per cent in Q1 2026-27 and 4.0 per cent in Q2, still within the central bank’s 2-6 per cent target range. (ANI)
