RBI Raises Inflation Projections Marginally for Apr-Sep; Defers FY27 Forecast to April

The Reserve Bank of India’s Monetary Policy Committee has raised its inflation forecast for the last quarter of 2025-26 and the first two quarters of 2026-27, primarily due to an increase in prices of precious metals. The committee deferred the projections for 2026-27 to April, awaiting the release of the new Consumer Price Index series.

The committee raised its forecast for CPI inflation for January-March to 3.2% from 2.9% earlier. Consequently, the forecast for 2025-26 has been raised to 2.1% from 2.0% earlier. The forecast for CPI inflation for April-June has been raised to 4.0% from 3.9% and that for July-September to 4.2% from 4.0% earlier.

“The slight upward revision in the inflation outlook is primarily due to an increase in prices of precious metals, which contribute about 60-70 basis points,” RBI Governor Sanjay Malhotra said announcing the policy decision. “The underlying inflation continues to be low,” he added.

Projections for the full year 2026-27 will be announced in the April policy after incorporating the new CPI series with 2024 as the base year, which will be released on February 12.

The outlook for CPI inflation in April-June and July-September remains benign and near the inflation target, the monetary policy statement said.

“The near-term outlook suggests that food supply prospects remain bright on the back of healthy kharif production, adequate buffer stocks of foodgrains and favourable rabi sowing,” the statement said.

Core inflation, barring volatility induced by precious metal prices, is expected to remain range-bound. However, geopolitical uncertainty, volatility in energy prices, and adverse weather events pose possible upside risks to inflation, it said.

“Amidst heightened geopolitical tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation. Inflation remains below the tolerance band, and its outlook continues to be benign,” Malhotra said.

Headline CPI inflation remained low in November and December, even as it firmed up by about one percentage point in these two months. The increase was largely driven by moderation in deflation in the food group.  Excluding gold, core inflation remained stable at 2.6% in December, the governor said.

Despite the anticipated momentum being muted, unfavourable base effects stemming from a large decline in prices observed in the last quarter of 2024-25 would lead to an uptick in inflation in January-March, he said.

“Benign inflation provides the leeway to remain growth-supportive while preserving financial stability,” Malhotra said.