NewKerala.com

India's Inflation Forecast: Why a 2.5% Average Hints at a 'Goldilocks' Economy

Crisil has come out with its forecast for the coming financial year, predicting retail inflation will average 2.5%. The rating agency points to fading base effects in food prices and supportive GST cuts as key factors. This comes as the RBI Governor describes India's current economic moment as a 'rare goldilocks period' of strong growth and low inflation. The central bank itself has revised its inflation projection downward, expecting it to remain comfortably within its target band.

Key Points: Crisil Forecasts India Retail Inflation at 2.5% for FY26

  • Crisil forecasts FY26 retail inflation at 2.5%, up slightly from current lows
  • GST rate cuts on mass goods are helping to support core inflation levels
  • RBI Governor calls current high-growth, low-inflation phase a 'rare goldilocks period'
  • Nearly 80% of the CPI basket shows inflation below the 4% mark, indicating broad softening
2 min read

India retail inflation to average 2.5% in 2025-26 fiscal: Crisil

Crisil projects India's CPI inflation to average 2.5% in FY26, as GST cuts support core inflation and the RBI cites a 'goldilocks' period of high growth and low inflation.

"We expect CPI inflation to average 2.5 per cent this fiscal. - Crisil"

New Delhi, December 13

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

Share this article:

Reader Comments

R
Rohit P
"Goldilocks period" sounds great on paper, but I'm not feeling it at the local market. Tomato prices are still up and down like a yo-yo. The headline number is low, but we need to see this stability translate to our monthly kirana bills.
A
Aditya G
The RBI cutting rates is a smart move in this environment. Lower inflation gives them room to support growth. This combination of high growth and low inflation is rare for any economy, let alone a large one like India's. Kudos to the policymakers.
S
Sarah B
As an expat following the Indian economy, these are impressive figures. Maintaining inflation within target while growing fast is a tough act. The healthy rabi sowing mentioned is crucial—monsoon and agriculture remain the wild cards.
K
Karthik V
While the overall trend is positive, we must be cautious. The projection shows it rising to 4% by Q2 of next fiscal. Global crude prices are a big "if". Let's not celebrate too early; the government needs to keep a close watch on food supply chains.
M
Meera T
Finally some relief! For the last two years, salary increments were just catching up with price rises. If this holds, maybe we can actually save a little or plan a family vacation. The GST cut on everyday items is a big yes from middle-class India! 😊

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50