Retail Inflation: India’s retail inflation expected to be 4% in FY 2025-26: Morgan Stanley

American investment bank and financial service company Morgan Stanley has expected India’s retail inflation to be four percent on an average in FY 2025-26. In the report released on Tuesday, March 18, the company said that the Consumer Price Index (CPI) based inflation rate is at four percent means that in the coming months, the RBI can cut policy interest rates by 0.75 percent, while earlier an estimate of 0.50 percent was estimated.

Another reduction of 0.25 percent in policy rates is possible

According to Morgan Stanley, there is a scope for additional cuts in inflation due to the decrease in the prices of foods. The report said, “Two consecutive months (in January and February) overall inflation rates have been lower than estimates. Given this, we update our monetary policy landscape, and add another cut of 0.25 percent (in policy rates).”

Retail inflation will be 4 percent on an average in FY 2025-26: Report

It has been hoped that retail inflation will be four percent on an average in the financial year 2025-26, while earlier 4.3 percent was estimated. The US company said, “Thus, we are moving towards a cumulative rate of 0.75 percent from our previous estimate of 0.50 percent.”

The figures of retail inflation of January and February saw a sharp decline than expected, which became possible due to a decrease in food inflation. At the same time, core inflation remained in limited scope at a lower level.

CPI based inflation was 3.61 percent in February. For the first time in six months, it has come below the RBI’s four percent target. Food inflation has been more than overall inflation in the last 12 months. Meteorological disruption has also contributed to this.

Rabi and Kharif crop production estimated annual growth

The report said, “However, the land inflation scenario for FY 2025-26 has improved as Rabi and Kharif crop production is estimated to increase on an annual basis, which will also help in reducing volatility.”

Even though development is accelerating, the trend of debt growth is still soft at 11 percent, which keeps away the concerns of financial stability and reflects the possibility of further cuts on the regulation and liquidity front.

The report stated that the decline in core inflation has been amazing, which is inspired by the low level of inflation of core goods and services. In the world, the core inflation may increase when the base effects are normal, but the commodity prices are expected to be around four percent, inspired by limits.

Impact of reduction in inflation of foods

The report states that the impact of decrease in inflation of food items is likely to appear on the continuity of a decline in overall CPI, on which the RBI focus is. In this context, in this context, the softening of overall inflation creates more scope for further cuts in policy rates by RBI.