By Martin Shwenk Leade
Copyright indiatimes
PTIRBI Guv Sanjay Malhotra
The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday said inflation has eased and is likely to moderate further in FY26, supported by GST rate cuts, a favourable outlook on food prices and improved supply prospects. However, it cautioned that geopolitical tensions and tariff-related trade disruptions could weigh on the outlook.For the full year FY26, the RBI has projected headline inflation at 2.6%, significantly lower than the 3.1% forecast made in August. Quarter-wise estimates are: 1.8% in Q2, 1.8% in Q3, Q4 at 4% and Q1 FY27 at 4.5%. The central bank maintained that risks to the outlook are “evenly balanced.”The RBI also noted that Core inflation has remained largely contained at 4.2% in August. Malhotra said, “The MPC observed that the overall inflation outlook has turned even more benign in the last few months due to a sharp decline in food prices and the rationalisation of GST rates.”Retail inflation in India has quickened to 2.07% in August from an eight-year low of 1.55% in July, largely due to the fading impact of high base effects. The inflation has stayed within RBI’s tolerance band of 2-4% rate, which aligns with earlier forecasts in the Economic Survey and favourable macroeconomic indicators, in the first quarter of FY26.Live EventsAlso Read: RBI MPC Meeting 2025-26 Key TakeawaysSanjay Malhotra & Co. unanimously voted to keep repo rates unchanged yet again as the RBI stays focused on supporting growth amid improving inflation conditions and ongoing global economic uncertainty. The central bank also maintained its “neutral” stance, suggesting doors open either ways to aid economic growth amid global trade uncertainties.The decision to maintain an neutral stance comes despite concerns over trade tensions and tariff-related disruptions. The RBI, earlier, had said it would continue managing liquidity to ensure adequate credit flow, especially to productive sectors.GST to play a key roleThe RBI highlighted that the recent rationalisation of GST rates is expected to lower prices across several items in the CPI basket, further supporting benign inflation conditions. It added that GST reforms, coupled with an above-normal monsoon, good kharif sowing progress and adequate reservoir levels, are likely to aid agriculture and rural demand.Also Read: RBI MPC keeps repo rate unchanged at 5.5%; growth and inflation projections revisedThe central bank also underlined that GST reforms will help support consumption and investment by boosting disposable income and improving demand conditions. The implementation of such structural reforms is expected to offset part of the adverse impact from tariff-related uncertainties and weak external demand.Earlier projections on inflationThe central bank, in its annual report for FY25 had said that it expects inflation to remain moderate in FY26, helped by favourable base effects and easing supply-side pressures. It also cautioned that the outlook remains subject to risks, particularly from monsoon performance and global geopolitical developments.Meanwhile, in its July Bulletin, the central bank had mentioned that a 10% rise in global crude oil prices could increase India’s headline inflation by around 20 basis points on a contemporaneous basis, as per empirical estimates. The increase in oil import dependency warrants measures not only to contain the spillovers to domestic prices but also to gradually transit towards alternative sources of fuel for more efficient management of domestic fuel prices in the long run, it said.Add as a Reliable and Trusted News Source Add Now!
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