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Key Points

India's retail inflation is likely to stay below the RBI's Q1FY26 projection of 2.9%, according to a Bank of Baroda report. Food prices, especially vegetables and pulses, have moderated due to better supply and policy measures. However, core inflation could remain sticky as demand picks up post-RBI rate cuts. The report cautions about potential risks from TOP (tomato, onion, potato) prices and global commodity volatility.

Key Points: India Retail Inflation May Dip Below RBI Forecast in Q1FY26

  • Food inflation eases due to improved supply and government policies
  • Core inflation may stay sticky amid rising demand
  • Tomato, onion, potato prices need monitoring
  • Global commodity volatility poses limited risk
2 min read

India's retail inflation in Q1FY26 (April-June) likely to fall below RBI forecast: BoB Report

Bank of Baroda report predicts CPI inflation below RBI's 2.9% projection, citing easing food prices but warns of sticky core inflation risks.

"We expect CPI in Q1 to undershoot RBI’s 2.9% forecast as Jun’25 high-frequency price data is also comforting. – Bank of Baroda Report"

New Delhi, June 13

According to a recent report by the Bank of Baroda (bob), India's retail inflation in the first quarter of FY26 is expected to undershoot the Reserve Bank of India's (RBI) forecast of 2.9 per cent.

The report suggested that the June 2025 high-frequency price data has also been comforting, offering further signs of price stability.

It said, "We expect CPI in Q1 to undershoot RBI's 2.9 per cent forecast as Jun'25 high-frequency price data is also comforting."

However, the report cautioned that inflation trends must be closely monitored, particularly regarding Tomato, Onion, and Potato (TOP) prices. Some buildup in these food items has been observed, although the increase remains gradual.

A significant relief in inflation during May 2025 came from the food category. Vegetables, pulses, cereals, and protein-based food items largely drove the moderation in prices.

The report also mentioned that this easing in food inflation is attributed to improved supply dynamics and the government's focused policies on supply management.

While food inflation appears under control, the report highlighted that core inflation could remain somewhat sticky. This is due to a pickup in demand, supported by the RBI's jumbo rate cut and the ample liquidity provided in the system.

The report noted that going forward, some stickiness in core inflation is likely, in line with rising government expenditure and improved rural demand. The increase in Minimum Support Prices (MSP) and relatively stable food prices will also play a role in maintaining this trend.

On the external front, the report pointed to some volatility in global commodity prices, especially crude oil, due to ongoing geopolitical tensions. However, it added that a major price surge is unlikely as global demand remains weak, which is evident from high-frequency data across major economies.

The report added that the inflation outlook for the year remains favourable, provided the monsoon progresses well. Additionally, clarity on global tariff policies, especially with the upcoming July 2025 deadline, is expected to provide more direction to the inflation trajectory.

- ANI

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Reader Comments

R
Rajesh K.
Good news for middle class families! Lower inflation means our monthly budgets can breathe a little. But I hope the government keeps monitoring TOP prices - we all know how these three vegetables can suddenly make cooking expensive. 🍅🧅🥔
P
Priya M.
While the numbers look positive, I'm skeptical about how this translates to actual market prices. In my local sabzi mandi, prices still feel high compared to last year. Maybe the data needs to account for regional variations better?
A
Amit S.
RBI's conservative forecast being beaten is excellent! This shows our supply chain improvements are working. Hope they consider more rate cuts now to boost business loans. Jai Hind! 🇮🇳
S
Sunita R.
As a homemaker, I can confirm dal and vegetables have become slightly cheaper this month. But oil prices still pinch. The report mentions crude volatility - hope our government has backup plans if global prices rise suddenly.
V
Vikram J.
Core inflation staying sticky is concerning. While food prices get attention, we must remember services, education and healthcare costs keep rising. RBI should not relax too much based on temporary food price relief alone.
N
Neha T.
Monsoon progress is the real key! All these numbers can change if rains fail. My farmer relatives in Maharashtra are already worried about delayed showers. Government should prepare contingency plans for both scenarios - good or bad monsoon.

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