India’s Consumer Price Index (CPI) inflation for FY26 is expected to remain at 2.2 per cent, lower than the Reserve Bank of India’s (RBI) projection of 2.6 per cent, according to a report by the State Bank of India (SBI).
The report attributed the sharp moderation in inflation mainly to a decline in food and beverage prices. “We expect average CPI inflation for FY26 to be now at 2.2 per cent, much lower than the RBI’s forecast of 2.6 per cent,” it said.
According to SBI, India’s CPI inflation eased to a 99-month low of 1.54 per cent in September 2025, driven by a fall in food and beverage inflation. The decline in inflation since October 2024 has been primarily led by the food group, whose contribution moved from a large positive to a negative between October 2024 and September 2025.
The report noted that although food prices recorded a modest seasonal pick-up since May, favourable base effects offset the mild upward movement, keeping year-on-year inflation on a declining path. It added that core CPI, excluding gold, currently stands at 3.28 per cent.
SBI cautioned that the RBI, whose primary mandate is inflation targeting, risks missing its target if it continues to focus on market volatility despite clear signs of a steady slowdown in inflation. It said long-term inflation data appear detached from the central bank’s own projections.
The report further suggested that it would be preferable for the RBI to err on the side of a rate cut rather than remain overly cautious and lag behind the curve, particularly when market participants remain uncertain about the central bank’s next move.
SBI expects inflation to fall further to around 0.45 per cent next month, strengthening the case for policy easing. It also projected inflation for FY27 to remain stable at around 3.7 per cent, indicating continued price stability in the coming years.
ANI