CRISIL Projects 4.5% Inflation Amid Diverse Economic Indicators

CRISIL, a leading ratings and economic research firm, forecasts an average inflation rate of 4.5% for the current financial year. The firm expects food inflation to ease assuming a normal monsoon, while non-food inflation might see a slight increase. Rural demand is anticipated to catch up with urban consumption.

In its latest report, leading ratings and economic research firm CRISIL has projected an average inflation rate of 4.5% for the current financial year. The outlook takes into account the potential for a normal monsoon, which is expected to soften food inflation. However, CRISIL indicates that non-food inflation could see an uptick, albeit remaining constrained by benign commodity prices.

Consumer price index (CPI) inflation made a slight retreat to 4.75% in May from 4.8% in April 2024. The report highlights that while non-food categories helped pull down headline inflation, the persistent rise in the prices of food categories, including cereals and pulses, is concerning. This marks the fourth consecutive month of food inflation staying above 8.5%.

The report anticipates a rebalancing in domestic demand, with rural demand projected to align with urban consumption levels. This is predicated on the assumption of an above-normal monsoon, which is seen as beneficial for rural incomes. However, the urban economy might face challenges due to tighter credit conditions and moderated bank retail credit growth. Furthermore, slower global growth could impede the upside in goods exports, with the GDP expected to slow down to 6.8% this fiscal from 8.2% in the previous year.