SBI Projects Easing Inflation by FY25 Amid Fiscal Challenges

India's retail inflation is expected to decline to 4.5% in the last quarter of FY25, averaging 4.8% for the year, with further easing anticipated in FY26. The SBI report highlights the challenges faced by the RBI, including fiscal stimuli and global trade tensions, while suggesting room for potential interest rate cuts.

India's retail inflation is projected to ease to 4.5% in the final quarter of the fiscal year 2024-25 (FY25), with the annual average inflation likely pegged at 4.8%, according to a State Bank of India (SBI) report. Looking ahead, inflation is anticipated to further decrease in FY26, with a forecasted range of 4.2% to 4.5%.

The SBI report indicated that domestic consumer price index (CPI) inflation might dip to 4.5% by Q4 FY25. The report also hinted that inflation could fall below 4% in the October-December quarter of 2026. Notably, core inflation may surpass headline figures by September 2025, highlighting ongoing economic challenges.

The Reserve Bank of India (RBI) confronts a complex landscape in managing inflation risks, exacerbated by fiscal stimulus and unpredictable global trade tensions. In the short term, the RBI might consider interest rate reductions, assuming a delay in fiscal stimulus effects. Moreover, the US Federal Reserve's stable interest rates offer RBI a strategic window to stabilize inflation expectations.

(With inputs from agencies.)