Ratings agency cites normalisation of food prices and base effects; outlook may allow RBI to maintain repo rate pause
India’s consumer price inflation is projected to rise to 4.3 per cent in fiscal year 2027 from an estimated 2.5 per cent in fiscal 2026, driven largely by the normalisation of food prices and base effects, according to a report by Crisil.
The ratings agency said retail inflation, which had softened significantly in the current fiscal, is expected to edge higher as food inflation moves up from unusually low levels. The increase, however, is likely to remain within manageable levels.
“We expect retail inflation to rise to around 4.3 per cent in fiscal 2027 from an estimated 2.5 per cent in fiscal 2026,” Crisil said in its report.
The anticipated uptick in inflation is attributed mainly to a low base effect in food prices. While food inflation is expected to remain broadly benign, supported by the assumption of a normal monsoon in 2026, the comparison with the current year’s low base is likely to push up the overall reading in FY27.
Crisil noted that the revised Consumer Price Index (CPI) series, which assigns a lower weight to food items, may limit the extent of the increase. The reduced food weighting could also dampen volatility in food inflation under the new structure, providing greater stability to headline inflation over time.
The agency added that despite the expected rise, inflation is likely to remain within the Reserve Bank of India’s tolerance band, offering room for policy stability.
According to the report, the inflation trajectory would allow the RBI’s Monetary Policy Committee to maintain its pause on the repo rate. The central bank is expected to focus on ensuring effective transmission of the cumulative 125 basis point rate cuts undertaken in calendar year 2025.
According to the report, the inflationary pressures may firm up in FY27; they are unlikely to derail macroeconomic stability, provided food prices remain contained and external shocks are limited.
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