Inflation rate will be lower than RBI's estimate: SBI

New Delhi (The Uttam Hindu) – India's inflation rate will be lower than the Reserve Bank of India's (RBI) projections for FY26 (the current financial year) and FY27, according to a State Bank of India report. The report said the central bank's approach should be viewed not as monetary policy, but as a regulatory policy that reflects India's unique economic conditions.

SBI stated that several factors are contributing to the decline in inflation, including the good progress of the monsoon, strong reservoir levels, adequate foodgrain stocks, and GST reforms. These factors combined are contributing to a faster-than-expected decline in inflation. The RBI has lowered its retail inflation forecast for FY26 by 50 basis points to 2.6 percent, a 160 basis point decrease from its April forecast. However, SBI believes inflation will remain lower than expected in FY26 and FY27. The central governor lowered its retail inflation forecast for FY26 (current financial year) to 2.6 percent, from 3.1 percent in August.

The inflation forecast for the second quarter of the current financial year has been reduced from 2.1 percent to 1.8 percent, for the third quarter from 3.1 percent to 1.8 percent and for the fourth quarter to 4 percent.

The RBI further projected that inflation could remain at 4.5 percent in the first quarter of FY27. In its October monetary policy, the RBI raised its GDP growth forecast for FY26 to 6.8 percent. The report further stated that given global uncertainties and volatile markets, the Monetary Policy Committee's (MPC) decision to keep rates unchanged appears prudent. It also stated that RBI communications play a key role in shaping expectations and ensuring clarity about its policy direction.