The report now estimates headline Consumer Price Index (CPI) inflation at around 3.5% for FY26, with a downward bias. “CPI inflation may come down to 2.9% in Q1 FY26 as food inflation is expected to be within the target in the June quarter,” SBI noted.
The India Meteorological Department (IMD) has forecast above-normal rainfall for the June–September period. Combined with strong crop arrivals, this is expected to keep food prices well-anchored. Core inflation too is expected to ease to 3.7–3.8% over the fiscal year.
“With crude oil prices declining and supply-side conditions improving, the inflation trajectory should remain well within the RBI’s tolerance band till December 2025,” the report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser stated.
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The report also pointed out that easing inflation, combined with surplus liquidity and muted credit growth, gives the Reserve Bank of India room for policy action. SBI expects the RBI to cut the repo rate by a sizeable 50 basis points in its June 6 meeting.
India’s GDP growth stood at 7.4% in Q4 FY25, but is expected to moderate to 6.3–6.5% in FY26, making policy support crucial to sustaining momentum.
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