Crisil Projects India’s FY26 Inflation at 3.2% Amid Global Headwinds
Crisil predicts lower inflation, boosting economic growth prospects.
In a promising forecast for India’s economy, research and ratings firm Crisil has projected headline inflation for the fiscal year 2025-26 at a modest 3.2%, down from its earlier estimate of 3.5%. This significant moderation, outlined in Crisil’s latest report, signals a decline of 140 basis points in Consumer Price Index (CPI) inflation compared to the current financial year, potentially paving the way for monetary easing and spurring economic growth.
The report suggests that the Reserve Bank of India (RBI) could implement an additional 25-basis-point rate cut this year, a move that would lower borrowing costs and stimulate domestic demand. “Lower inflation and reduced interest rates should bolster domestic consumption, especially as global economic headwinds intensify,” the report noted, highlighting the potential for increased economic activity in sectors like retail, real estate, and consumer goods.
However, Crisil cautioned that excessive rainfall during the kharif season poses a risk to this optimistic outlook. Heavy rains have already caused significant disruptions in key agricultural regions, with Punjab facing its worst floods in four decades. These conditions could impact horticulture and foodgrain production, potentially pushing food prices higher and challenging the inflation forecast.
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Recent data shows CPI inflation rising to 2.1% in August 2025, up from 1.6% in July, crossing the RBI’s lower tolerance threshold of 2%. While food inflation remains below headline inflation, it has begun to climb from historic lows, driven by weather-related supply disruptions. Crisil emphasized that careful monitoring of agricultural output will be crucial to maintaining the projected low inflation trajectory.
The anticipated decline in inflation comes at a critical time as India navigates global economic uncertainties, including volatile commodity prices and geopolitical tensions. A lower inflation rate could enhance consumer confidence, encourage spending, and attract investment, positioning India as a resilient economy. The RBI’s potential rate cut, combined with proactive fiscal policies, could further amplify these benefits, fostering a robust economic environment in the coming year.
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