India's Inflation Outlook Brightens

Consumer inflation in India is projected to ease to an average of 4% in the current financial year, a decrease from 4.6% in FY25, as per the latest Crisil report. This moderation is attributed to softer food prices, thanks to above-normal monsoon forecasts, and lower global commodity prices.

Monsoon and Policy Cuts to Support Growth

"Food inflation is expected to be softer given the forecasts of above-normal monsoon," the report highlighted. Additionally, non-food inflation is anticipated to remain subdued due to easing input costs.

RBI's Monetary Policy Flexibility

The favorable inflation outlook may provide the Reserve Bank of India's Monetary Policy Committee (MPC) with the leeway to implement another repo rate cut this fiscal year before pausing, amidst global volatility.

GDP Growth and Risks Ahead

Crisil projects India’s GDP growth at 6.5% in FY26, cautioning about potential risks from global factors, including US tariff moves affecting exports. Domestic factors like adequate monsoon and repo rate cuts are expected to bolster growth.

Financial Market Volatility

The report also notes a surge in crude oil prices, reaching $80 per barrel in June, exerting pressure on bond yields, equity markets, and the rupee, highlighting the need for cautious optimism in the financial markets.