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Key Points

The State Bank of India's latest report suggests inflation will run significantly lower than the Reserve Bank's projections over the next two financial years. Several domestic factors including good monsoon progress and GST rate changes are working to ease price pressures. Meanwhile, the RBI has already cut its FY26 inflation forecast by 160 basis points from April levels. The report notes the Monetary Policy Committee's rate pause appears logical given global economic uncertainties.

Key Points: SBI Report Predicts Lower Inflation Than RBI FY26 FY27

  • Healthy monsoon progress and higher kharif sowing supporting price stability
  • RBI revised FY26 inflation projection down 160 basis points from April
  • Monetary Policy Committee maintains rate pause amid global uncertainty
  • Comfortable liquidity conditions enabling forward-looking economic reforms
2 min read

Inflation likely to be much lower than RBI projections in FY26 and FY27: SBI Report

SBI research indicates inflation in FY26 and FY27 will fall significantly below RBI projections, citing monsoon progress and GST rationalization as key factors.

"We believe both FY26 and FY27 inflation numbers are likely to be much lower - SBI Report"

New Delhi, October 2

Inflation in the current financial year and the next financial year (FY27) is likely to be much lower than the Reserve Bank of India's (RBI) projections, according to a report released by the State Bank of India (SBI).

The report highlighted that several domestic factors are working in favour of easing price pressures. These include healthy progress of the monsoon, higher kharif sowing, adequate reservoir levels, comfortable buffer stock of foodgrains, and the most significant factor, GST rate rationalization.

Taking these into account, the RBI recently revised downwards its FY26 CPI inflation projection by 50 basis points to 2.6 per cent, which marks a steep 160 basis point cut from the levels projected in April.

However, the report that actual inflation in both FY26 and FY27 could be much lower than the RBI's revised estimates, supported by the positive domestic environment.

It stated, "RBI has revised downwards its FY26 CPI inflation projection by 50 bps to 2.6 per cent (a 160 basis point downward revision from April levels). We believe both FY26 and FY27 inflation numbers are likely to be much lower."

Alongside inflation, the regulator has also revised upwards its estimate for real GDP growth for FY26 to 6.8 per cent. For FY27, inflation numbers have been projected at 4.5 per cent.

The report further observed that in the face of global economic uncertainty and volatility in financial markets, the Monetary Policy Committee's (MPC) unanimous decision to hold the policy rate unchanged seems logical from a regulatory perspective.

It added that monetary policy communication is crucial in guiding expectations, shaping perceptions of the reaction function, and maintaining clarity in forward guidance.

In this context, the report mentioned that RBI appears to have left the door open for future rate cuts, given the low inflation forecasts and the recent downward adjustments in growth estimates. However, the exact timing of such a move remains uncertain.

The report also noted that the MPC's status quo decision reflects a rare form of dynamism that extends beyond monetary policy.

This approach, the report said, is facilitated by comfortable liquidity conditions and a benign external sector despite ongoing trade-led uncertainties.

The domestic financial system, it added, stands to benefit the most through a series of forward-looking reforms aimed at strengthening India's global positioning and reinforcing its already resilient economic ecosystem.

- ANI

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Reader Comments

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Rohit P
Good monsoon and higher kharif sowing are indeed positive signs. But I hope the government ensures that farmers get proper MSP and benefits. Lower inflation shouldn't come at the cost of farmer welfare.
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Arjun K
As someone working in finance, I find SBI's projections quite optimistic. While domestic factors look good, global uncertainties and crude oil prices could still play spoilsport. Let's hope they're right though! 🤞
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Sarah B
Lower inflation combined with 6.8% GDP growth projection sounds like a dream scenario for India's economy. This could really boost investor confidence and create more job opportunities. Excellent news for young professionals like me!
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Vikram M
I appreciate that RBI is being cautious and holding rates steady. Sudden policy changes can create market volatility. Better to wait and watch than make hasty decisions that could backfire.
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Michael C
While the projections look promising, I hope the benefits actually reach common people. Often we see positive economic data but don't feel the impact in our daily lives. Implementation is key.
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Ananya R
If inflation stays low, maybe we'll finally see some relief in education and healthcare costs. These have been rising uncontrollably and affecting middle-class families the most. Fingers crossed! 🤞

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