India’s Retail Inflation in FY26 Will Be at 4%, Forecasts Crisil

Kolkata, July 16, 2025 –Crisil Ratings  has forecasted that India’s retail inflation (as measured by the Consumer Price Index) is likely to hover around 4% in the current financial year, down from 4.6% in the previous year.

According to Crisil’s latest research report, food inflation is expected to soften, supported by the Indian Meteorological Department’s (IMD) forecast of an above-normal monsoon. On the non-food front, easing global commodity prices are expected to contain inflation further.

GDP Growth Forecast at 6.5% with Downside Risks

Crisil has maintained its GDP growth projection at 6.5 percent for FY26. However, it cautioned that downside risks persist, particularly from global factors such as the recent tariff moves by the US, which could weigh on India’s exports.

Domestically, the report sees adequate monsoon rains and the recent repo rate cut as positive factors that could support growth momentum.

Liquidity Supportive, But Volatility Looms

The report noted that liquidity conditions in the financial system remain supportive, which should bolster economic activity. However, capital flows are expected to remain volatile, and the rupee may continue to face pressure amid global uncertainty.

Bank credit growth has shown signs of weakness, with data till May 2025 indicating a slowdown in lending during the first quarter.

Further Rate Cut Possible Amid Easing Inflation

Crisil believes that the softening inflation trend could create room for another repo rate cut by the MPC within this fiscal year, potentially followed by a pause.

The RBI had previously reduced the repo rate by 50 basis points in June, bringing it down to 5.5 percent.

Rising Crude Prices Add to External Pressures

The report highlighted that global uncertainties have led to a spike in crude oil prices, which touched USD 80 per barrel in June 2025 – the highest level since January. This rise has exerted pressure on bond yields, equity markets, and the Indian currency.

Despite these headwinds, Crisil remains cautiously optimistic about India’s economic trajectory, provided domestic conditions remain stable and global shocks are managed effectively.

Disclaimer:  At HDFC SKY, we take utmost care and due diligence in curating and presenting news and market-related content. However, inadvertent errors or omissions may occasionally occur.

If you have any concerns, questions, or wish to point out any discrepancies in our content, please feel free to write to us at content@hdfcsec.com.

Please note that the information shared is intended solely for informational purposes and does not make any investment recommendations