Consumer price index (CPI) inflation to average 4% in FY26, down from 4.6% in FY25: Crisil
- IBEF
- July 17, 2025
Rating agency Crisil’s latest research report projects consumer price index (CPI) based inflation to average 4% in FY26, down from 4.6% in FY25. The agency attributes the softer inflation outlook primarily to favourable food inflation, supported by forecasts of an above-normal monsoon by the Indian Meteorological Department (IMD). Non-food inflation is also expected to remain subdued due to lower commodity prices. CPI remains the key inflation measure targeted by the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC). Crisil estimates gross domestic product (GDP) growth at 6.5% for the year, though it notes downside risks such as potential tariff changes by the United States (US), which could affect exports. Domestic factors, including an adequate monsoon and repo rate cuts, are expected to bolster growth.
The report highlights supportive liquidity conditions aiding the economy’s financial system. However, capital flows and the rupee are expected to remain volatile amid global uncertainties. Bank credit growth continues to show weakness, with data up to May 2025 indicating a further slowdown in the first quarter. Crisil anticipates that the easing inflation will enable the MPC to reduce the repo rate once more this fiscal year, followed by a pause in rate cuts. However, global factors such as rising crude oil prices, which surged to Rs. 6,874 (US$ 80) per barrel in June for the first time since January 2025, pose challenges, exerting pressure on bond yields, equity markets, and the rupee. The MPC had previously cut the repo rate by 50 basis points in June, lowering it to 5.5%, aiming to support growth while managing inflation risks amid an uncertain global environment.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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