India’s headline inflation is expected to average 3.5 per cent in the current fiscal (FY26), down from 4.6 per cent last year, according to a report by Crisil released on Wednesday. The decline is attributed to healthy agricultural production, which is likely to keep food prices under control.
Kharif sowing has risen 4 per cent year-on-year as of August 8, with adequate soil moisture expected to support the upcoming rabi crop as well.
The report projects Brent crude oil prices to remain in the range of $60–65 per barrel this fiscal, provided geopolitical uncertainties stay contained. This is expected to help keep non-food inflation subdued.
Retail inflation has more than halved over the past year, falling below the Reserve Bank of India’s lower tolerance limit of 2 per cent. It eased to 1.6 per cent in July from 2.1 per cent in June, compared to 3.6 per cent a year ago.
Food inflation dropped to -1.8 per cent in July – the lowest since January 2019 – while core inflation fell sharply to 3.9 per cent from 4.4 per cent, driven by a decline in transport and communication costs. Fuel inflation inched up slightly to 2.7 per cent from 2.6 per cent.
Crisil noted that deeper deflation in vegetables and pulses, along with easing cereal prices, provided downward support to inflation. Its Thali Index showed the cost of vegetarian and non-vegetarian thalis fell 14 per cent and 13 per cent year-on-year, respectively, due to lower vegetable and broiler prices.
The report also anticipates another repo rate cut this fiscal. “A cumulative cut of 100 basis points so far, along with adequate liquidity, has ensured swift transmission. The sharp fall in retail inflation should buoy household purchasing power, particularly among lower-income groups, and create room for further monetary policy easing,” Crisil stated.
—IANS
