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Key Points

India's inflation is showing promising signs of moderation, dropping to 2.8% in May, the lowest in recent years. The Crisil report suggests this trend could prompt another rate cut by the Reserve Bank of India. Agricultural prospects look bright with a robust rabi harvest and a favorable monsoon forecast. These factors collectively indicate a potentially stable economic environment for the upcoming fiscal year.

Key Points: RBI Rate Cut Likely as India Inflation Drops to 4%

  • Inflation drops to 2.8% in May, lowest since February 2019
  • Rabi harvest indicates robust agricultural output
  • Monsoon forecast suggests positive economic indicators
2 min read

India inflation to average 4 pc this fiscal, one more RBI rate cut likely: Crisil

Crisil forecasts 4% inflation in FY26, suggests potential RBI rate cut with softening food and fuel prices

"The rains would have a positive impact on the upcoming kharif season - Crisil Report"

New Delhi, June 13

Given the current inflation trajectory, headline inflation is projected to average 4 per cent this fiscal (FY26), from 4.6 per cent last fiscal, a Crisil report said on Friday.

Lower inflation keeps the window open for one more repo rate cut by the Reserve Bank of India (RBI), apart from the 100 basis points cut announced so far, the report forecast.

The Consumer Price Index (CPI)-based inflation dropped to 2.8 per cent in May, the lowest reading since February 2019, from 3.2 per cent in April as food inflation continued to decline.

Fuel and core inflation also softened. Food inflation fell to 1 per cent, the lowest since October 2021, from 1.8 per cent in April. Fuel inflation reversed trend and eased marginally to 2.8 per cent from 2.9 per cent.

Core inflation eased to 4.18 per cent from 4.23 per cent in April. Core inflation remained below its trend level (measured by the decadal average) of 4.9 per cent.

Among food items, pulses, vegetables and spices saw deflation, while cereals recorded lower inflation.

According to Crisil Intelligence—Research’s Thali Index released last week, the cost of both vegetarian and non-vegetarian thalis in May fell 6 per cent each on-year largely due to lower vegetable prices.

The Ministry of Agriculture’s Third Advance Estimates has indicated a robust rabi harvest with record wheat production.

“The India Meteorological Department (IMD) has forecast above-normal monsoon of 106 per cent of the long period average (LPA). The rains would have a positive impact on the upcoming kharif season,” said the report.

Both the above will keep food inflation in check this fiscal, provided there are no monsoon disruptions. Though the monsoon has lost some momentum in June, with all-India cumulative rainfall deficiency at 34 per cent of LPA, it is the rains in July and August that matter the most for kharif crops.

On the energy front assuming no sustained impact of geopolitical tensions, Brent crude oil prices are projected to remain subdued, ranging between $65 and $70 per barrel in the current calendar year, which should help contain non-food inflation, the report mentioned.

- IANS

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Reader Comments

R
Rajesh K.
Finally some good news for middle class families! Lower inflation means our monthly budgets can breathe a little easier. Hope RBI cuts rates further so home loans become more affordable. 🤞 But I worry if monsoon plays spoilsport later...
P
Priya M.
The thali index showing 6% drop is great, but in my local market, vegetable prices are still high. Reports and ground reality don't always match. Government should ensure benefits reach common people instead of just good numbers on paper.
A
Amit S.
As a small business owner, lower interest rates would be a big relief. But inflation control shouldn't come at the cost of growth. RBI needs to balance both carefully. Good monsoon prediction is the real gamechanger for our economy!
S
Sunita R.
Why is no one talking about pulses? Deflation in pulses is worrying for farmers like my uncle in MP. Government must ensure MSP protects farmers while keeping prices reasonable for consumers. It's a delicate balance.
V
Vikram J.
Good analysis by CRISIL. The 34% rainfall deficiency is concerning though. Hope July-August makes up for it. Our economy still dances to the tune of monsoon, despite all development. Time to invest more in irrigation and water conservation.
N
Neha T.
Lower fuel prices would be the biggest relief! Petrol at ₹100+ is burning holes in pockets. If crude stays around $65 as predicted, maybe we'll see some price cuts at pumps soon? Fingers crossed! 🙏

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