CPI inflation seen averaging 4% in FY26; monsoon, repo cuts to aid growth, says CRISIL

Consumer inflation in India is projected to ease to an average of 4% in the current financial year, down from 4.6% in FY25, according to the latest report by Crisil. The rating agency attributed the expected moderation to softer food prices, aided by above-normal monsoon forecasts from the Indian Meteorological Department (IMD), and lower global commodity prices."Food inflation is expected to be softer given the forecasts of above-normal monsoon," the report said, adding that non-food inflation will also remain subdued due to the easing of input costs, PTI reported.The Consumer Price Index (CPI) is the benchmark inflation metric used by the Reserve Bank of India's Monetary Policy Committee (MPC) to frame its interest rate decisions. According to Crisil, the favourable inflation outlook will likely give the MPC room to cut the repo rate once more this fiscal year before taking a pause.Crisil projected India’s GDP growth at 6.5% in FY26, though it cautioned that risks remain—particularly from global factors. "The tariff moves by the US are seen as a risk for exports, while domestic factors like an adequate monsoon and repo rate cuts will be supportive of growth," the report noted.The report also flagged weakness in bank credit growth, citing data till May 2025 that pointed to a softening trend in the first quarter of the year.

Liquidity conditions remain supportive, but the agency warned that capital flows and the rupee are likely to remain volatile due to external uncertainties.Crisil added that the surge in crude oil prices—touching $80 per barrel in June for the first time since January 2025—has triggered pressure on bond yields, equity markets, and the rupee.At its June meeting, the MPC reduced the repo rate by 50 basis points, bringing it down to 5.5%. Crisil expects one more rate cut before the central bank pauses amid lingering global volatility.