The apex bank’s governor stated that the uncertainties regarding rabi crops have abated considerably
As headline inflation moderated during January-February 2025 and with the outlook for food inflation turning decisively positive, the consumer price index (CPI) inflation for the financial year 2025-26 has been projected at four per cent, assuming a normal monsoon, as per Sanjay Malhotra, the Reserve Bank of India (RBI) Governor.
The apex bank’s governor stated that 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. The governor added that the risks are now evenly balanced.
“Assuming a normal monsoon, CPI inflation for the financial year 2025-26 is projected at 4.0 per cent, with Q1 at 3.6 per cent; Q2 at 3.9 per cent; Q3 at 3.8 per cent; and Q4 at 4.4 per cent. The risks are evenly balanced,” Malhotra stated after the Monetary Policy Committee (MPC) meet.
The sharp decline in inflation expectations in the central bank’s latest survey for three months and one year ahead would also help anchor inflation expectations going ahead, as per the statement by the apex bank.
“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,” Malhotra highlighted.
The governor said that risks to inflation are two-sided. On the upside, uncertainties may lead to possible currency pressures and imported inflation. On the downside, a slowdown in global growth could entail further softening in commodity and crude oil prices, putting downward pressure on inflation. He added that while global trade and policy uncertainties shall impede growth, its impact on domestic inflation, while requiring us to be vigilant, is not expected to be of high concern.
After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to six per cent with immediate effect. The Monetary Policy Committee (MPC) met on seven, eight and nine April to deliberate and decide on the policy repo rate in the backdrop of a challenging global environment.
