RBI Inflation Forecast: Inflation reduced to 3.7%, GDP expected to rise in GDP due to increasing demand

News India Live, Digital Desk: reserve Bank of India Not only did not only complete its much awaited rates, but also made a huge cut of 50 basis points. Governor Sanjay Malhotra said that the Monetary Policy Committee has taken this step due to rapid decrease in retail inflation and continuous focus on development. The measures announced on Friday morning raised hopes of continuous deduction in loan rates by banks and NBFCs on all types of loans for consumers, but also raised hopes of increasing growth rates for policy makers, promoting total consumption and employment generation.

Malhotra said, “The Indian economy is making good progress on both inflation and development fronts.” Malhotra indicated geopolitical tension and fluctuations in the global trade scenario, saying that the focus on domestic development amidst the continuous uncertainty of the outer region. He said that there is no conflict between price stability and development in the near and medium periods. However, after decreasing the repo rate from 6.50% to 5.5% between February and June, the RBI’s stance has become generous to neutral. The RBI chief said that the central bank will strictly monitor every economic data of income to take any new decision at the policy rate.

Referring to value stability in near and medium periods, better than normal, South-West monsoon and strong crop performance, the RBI chief referred to the CPI-based inflation forecast for the current financial year from 4% to 3.7%. Separating inflation figures, he said that inflation in different quarters may be 3.9% in the first quarter, 3.4% in the second quarter, 3.9% in the third quarter and 4.4% in the fourth quarter. He also mentioned how retail inflation fell to 3.2%, which was a 69 -month low.

He also hoped that Kharif and Rabi crops (especially wheat and pulses production) had been strong and this would help to control prices. For the last six months, there has been a decline trend in food inflation. He also mentioned the softening of crude oil prices. Incidentally, crude oil prices are a matter of concern for inflation managers as well as foreign exchange manager as it is the most expensive item in India’s import bill.

• It is important to mention in this regard that earlier this week a note of SBI Research Report stated that the central bank could cut a large rate of 50 basis points. Earlier this week, the SBI Research Report wrote, “We expect a rate of 50 basis points in the June 2025 policy as a big rate cut may lead to new life in the credit cycle… The cumulative rate deduction during the cycle may be of 100 basis points.” Explaining its expectations, SBI Research said, “The concerns of domestic liquidity and financial stability have decreased. Inflation is expected to remain in alert realm. To maintain the speed of domestic development must be the main policy focus and it gives justification of large rate cuts.” On the subject of inflation, it also mentioned:
• CPI inflation may decrease to 2.9% in the first quarter of FY 2026, as food inflation is expected to be within the June quarter.
• IMD has reduced our CPI estimate to ~ 3.5% in FY 26, which is estimated to have a better monsoon prediction, good arrivals of crops and fall in crude oil prices, which is estimated to fall.
• Core inflation can come from 3.7% to 3.8% in FY 26
• The main inflation will remain downwards till 25 December, but may increase after that

GDP landscape

Malhotra indicated that he would prefer to see a rapid growth in GDP. He forecast GDP growth 6.5% in FY 26. Dividing it among the quarters, he said that GDP will grow at 6.5% in the first quarter, 6.7% in the second quarter, 6.6% in the third quarter and 6.3% in the fourth quarter. The RBI governor clarified that a major uncertainty hovering on the horizon is mostly from the outskirts-the ongoing geopolitical crisis and uncertainty related to business, due to tariff measures by US President Donald Trump.

Healthy balance sheets of banks and corporates, strong government finance, strong exports and industrial activity, which showed signs of early growth, were due to hope for central bank officials. He also referred to the possible revival of demand in rural areas after good monsoon and agricultural production.

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