India’s Consumer Price Index (CPI) inflation for FY26 is expected to remain at 2.2 per cent, much lower than the Reserve Bank of India’s (RBI) forecast of 2.6 per cent, according to a report by the State Bank of India (SBI).
The report highlighted that the sharp moderation in inflation has been mainly driven by a decline in food and beverage prices. It stated, “We expect average CPI inflation for FY26 to be now at 2.2 per cent, much lower than 2.6 per cent RBI forecast.”
According to the report, India’s CPI inflation eased to a 99-month low of 1.54 per cent in September 2025 due to a fall in food and beverages inflation. Interestingly, the decline in inflation since October 2024 has been primarily led by the food group, as its contribution moved from a large positive to a negative between October 2024 and September 2025.
The report noted that although food prices recorded a modest seasonal pick-up since May, large favourable base effects offset the muted positive momentum, keeping year-on-year inflation on a declining trajectory.
It added that the core CPI, excluding gold, is currently running at 3.28 per cent.
The report further said that the RBI, whose primary mandate is inflation targeting, risks missing its target if it continues to focus on market noise despite the clear signs of a steady deceleration in inflation. It stated that the long-term inflation data appear detached from the figures released by the central bank in its own forecasts.
SBI suggested that it would be better for the RBI to err on the side of a rate cut (Type I error) rather than stay overly cautious and fall behind the curve, especially when market participants remain uncertain about the central bank’s next move.
The report added that inflation is expected to come around 0.45 per cent next month, making a strong case for decisive policy action. The report also mentioned that inflation prints for FY27 are currently projected to remain decisively lower at 3.7 per cent, indicating continued stability in price levels going forward.
