FPJ News Service MUMBAi

The CPI inflation for the financial year 2025-26 is projected at 4% as against 4.2% estimated earlier. Inflation for Q1 is estimated at 3.6%; Q2 at 3.9%; Q3 at 3.8%; and Q4 at 4.4%, the RBI said on Wednesday. The RBI noted that inflation is currently below the target, supported by a sharp fall in food inflation. Moreover, there is a decisive improvement in the inflation outlook. 

“The risks are evenly balanced. Assuming a normal monsoon, CPI inflation for FY26 is projected at 4%. Headline inflation moderated during January-February 2025 following a sharp correction in food inflation. The outlook for food inflation has turned decisively positive,” RBI said. 

The uncertainties regarding rabi crops have abated considerably and the second advance estimates point to a record wheat production and higher production of key pulses over that last year. Along with robust kharif arrivals, this is expected to set the stage for a durable softening of food inflation. Sharp decline in inflation expectations in our latest survey for three months and one year ahead would also help anchor inflation expectations, going ahead. Furthermore, the fall in crude oil prices augurs well for the inflation outlook. Concerns on lingering global market uncertainties and recurrence of adverse weather-related supply disruptions, however, pose upside risks to the inflation trajectory. 

CPI headline inflation declined by a cumulative 1.6 percentage points during January-February 2025, from 5.2% in December 2024 to a low of 3.6% in February 2025. On the back of a strong seasonal correction in vegetable prices this year, food inflation dropped to a 21-month low of 3.8% in February. Fuel group continued to remain in deflation. Core inflation, after remaining steady in December 2024-January 2025, inched up to 4.1% in February 2025, driven primarily by a sharp pick-up in gold prices.