India’s Inflation likely to be below 4% in FY26: SBI Report

In the first half of the fiscal year 2025–2026 (FY26), India’s inflation rate might stay below 4 percent, according to a State Bank of India (SBI) research. For the first time in recent memory, inflation may remain below 4 percent for two consecutive quarters.

According to the report, the United States has slapped retaliatory tariffs on other economies, surpassing even India’s. As a result, there will be less inflation since foreign nations will be more afraid to dump into India. It stated that in the fourth quarter of FY25, consumer price index (CPI) inflation is predicted to drop to 3.8%. The average inflation rate for the entire year FY25 might be 4.6%.

In light of this pattern, SBI projects that inflation would drop to 3.9% to 4.0% in FY26. Core inflation, which does not include the cost of food and fuel, is probably going to remain between 4.2% and 4.3%. Additionally, the research predicted that headline inflation would keep declining until September or October of 2025. There’s a chance it might increase again after that. Additionally, it identified a worldwide component that might affect inflation in India. Several nations have been subject to reciprocal tariffs imposed by the US. The tariffs imposed by India are lower than this.

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Therefore, there is concern that other nations will begin to dump their commodities at lower rates in India, which might cause the nation’s inflation rates to continue declining. The report also included an update on India’s current account balance. Based on the most recent trade and services statistics, it predicts that India’s current account will be in surplus in the fourth quarter of FY25.

In the third quarter of FY25, India’s current account deficit (CAD) was USD 11.5 billion. This amounted to 1.1% of the nation’s total income. It was less than the deficit of USD 16.7 billion (1.8 percent of GDP) observed in the second quarter of FY25, but it was marginally higher than the CAD of USD 10.4 billion (also 1.1% of GDP) in the same quarter previous year. In the third quarter of FY25, the merchandise trade deficit grew from USD 71.6 billion in the same time the year before to USD 79.2 billion. However, net services receipts improved the overall current account condition, increasing from USD 45.0 billion to USD 51.2 billion.