India’s Inflation to Average 4% This Fiscal, Another RBI Rate Cut Likely: Crisil

New Delhi – India’s headline inflation is expected to average 4% in the current fiscal year (FY26), down from 4.6% in the previous fiscal, according to a report by Crisil released on Friday.

The report suggests that with inflation trending lower, the Reserve Bank of India (RBI) may have room for one more cut in the repo rate, in addition to the 100 basis points of reductions already implemented.

Consumer Price Index (CPI)-based inflation dropped to 2.8% in May, the lowest since February 2019, down from 3.2% in April, driven by a continued decline in food inflation.

Fuel and core inflation also eased. Food inflation dipped to just 1%, the lowest level since October 2021, compared to 1.8% in April. Fuel inflation also moderated slightly, from 2.9% in April to 2.8% in May.

Core inflation—excluding food and fuel—eased to 4.18% from 4.23% in April, remaining below its decade-long average trend of 4.9%.

Among food items, prices of pulses, vegetables, and spices fell into deflation territory, while cereal inflation slowed.

According to Crisil Intelligence & Research’s recently released Thali Index, the cost of both vegetarian and non-vegetarian thalis in May declined by 6% year-on-year, largely due to cheaper vegetables.

The Ministry of Agriculture’s Third Advance Estimates show a strong rabi crop, including record wheat output, further supporting the positive inflation outlook.

“The India Meteorological Department (IMD) has forecast an above-normal monsoon at 106% of the long period average (LPA), which should benefit the upcoming kharif season,” the report noted.

This, along with the robust rabi harvest, is expected to help keep food inflation under control—assuming the monsoon proceeds without major disruption. Although June has seen a slowdown in rainfall, with a 34?ficiency in all-India cumulative rainfall, the crucial months for kharif crops are July and August.

On the energy front, assuming limited disruption from global geopolitical tensions, Brent crude oil prices are expected to remain stable between $65 and $70 per barrel this year—helping contain non-food inflation, the report added.

With inputs from IANS