SBI Report: Inflation Likely to Remain Below RBI Projections in FY26 and FY27
New Delhi: Inflation in the current financial year (FY26) and the next (FY27) is expected to be significantly lower than the Reserve Bank of India’s (RBI) forecasts, according to a report by the State Bank of India (SBI).
The report cited several domestic factors supporting easing price pressures, including a healthy monsoon, higher kharif sowing, adequate reservoir levels, comfortable foodgrain buffer stocks, and, most notably, GST rate rationalization.
Reflecting these trends, the RBI recently cut its FY26 CPI inflation projection by 50 basis points to 2.6%, a substantial 160-basis-point reduction from its April estimate. However, SBI believes actual inflation in both FY26 and FY27 could fall even below these revised levels. The report stated, “RBI has revised downwards its FY26 CPI inflation projection by 50 bps to 2.6% (a 160 bps downward revision from April). We expect inflation in FY26 and FY27 to be considerably lower.”
Alongside inflation, the RBI has raised its real GDP growth estimate for FY26 to 6.8%. For FY27, inflation is projected at 4.5%.
The report also noted that, amid global economic uncertainty and financial market volatility, the Monetary Policy Committee’s (MPC) unanimous decision to keep policy rates unchanged was a logical move. Effective monetary policy communication, the report emphasized, remains crucial for guiding expectations, shaping perceptions, and providing clear forward guidance.
SBI observed that the RBI appears to have left room for potential future rate cuts, given the low inflation outlook and recent downward revisions in growth estimates, though the timing remains uncertain. The report also highlighted that the MPC’s decision reflects a rare form of flexibility, supported by comfortable liquidity conditions and a benign external sector despite ongoing trade uncertainties.
Finally, the report noted that the domestic financial system stands to gain from forward-looking reforms aimed at strengthening India’s global positioning and reinforcing its resilient economic ecosystem.
