The Reserve Bank of India (RBI) Friday forecasted inflation to ease to 4.2 per cent in the upcoming financial year, buoyed by favourable conditions such as good crop production and ease in vegetable prices.Â
For the current financial year ending March, the central bank has projected CPI inflation at 4.8 per cent assuming a normal monsoon. The Sanjay Malhotra-led MPC has projected inflation at 4.5 per cent in the first quarter of the financial year 2025-26, 4 per cent in the second quarter; 3.8 per cent in Q3; and 4.2 per cent in Q4.
“Going ahead, food inflation pressures, absent any supply side shocks, should see a significant softening due to good kharif production, winter-easing in vegetable prices and favourable rabi crop prospects. Core inflation is expected to rise but remain moderate,” the RBI stated. Inflation hit an upper limit of 6.2 per cent in October 2024 but eased in November and December that year owing to a fall in vegetable prices, the central bank noted in its first monetary policy committee (MPC) meeting this year. The fourth quarter inflation for the current financial year is pegged at 4.4 per cent.
However, the central bank advised caution against rising uncertainty in global financial markets “coupled with continuing volatility in energy prices and adverse weather events” that could present upside risks to the inflation trajectory.Â
The RBI has cut the repo rate by 25 basis points to 6.25%—the first reduction in nearly five years.