RBI Forecasts Inflation to Align with Target in FY26

In the backdrop of easing crude oil prices and global trade uncertainties, RBI Governor Sanjay Malhotra stated that India’s inflation is expected to align well with the target during FY26. Speaking during the Monetary Policy Committee (MPC) meeting held from April 7–9, Malhotra highlighted that disinflationary forces are currently outweighing the inflationary risks, allowing room for monetary easing to support economic growth.

Why in News?

The Reserve Bank of India (RBI) released the minutes of the April 2025 MPC meeting, where it was revealed that the repo rate was cut by 25 basis points to 6%, and the stance was shifted from ‘neutral’ to ‘accommodative’. This policy decision, alongside the RBI’s positive inflation forecast, comes amid global trade tensions and a slowdown in commodity prices.

Background & Key Facts

• CPI inflation mandate: 4% target with a ±2% band.
• Current CPI (March 2025): 3.3% — lowest since August 2019.
• Repo rate cut: Reduced by 25 basis points to 6%.
• Policy stance change: From ‘neutral’ to ‘accommodative’.

Monetary Policy Highlights

• MPC unanimously voted to ease policy rates for the second consecutive time.
• RBI aims to nurture domestic demand amid global slowdown.
• Drop in crude oil prices and moderated commodity inflation led to lower CPI readings.

Implications of Global Trade & Tariffs

• Tariff-induced currency pressures may lead to imported inflation.
• However, slower global growth could suppress crude and commodity prices, aiding disinflation.
• US tariffs may impact India’s exports and market stability.

Expert Insights from MPC Members

• Sanjay Malhotra (Governor): Inflation outlook favorable; growth driven by domestic demand.
• Saugata Bhattacharya: Moderate inflation provides scope for “policy easing”.
• M Rajeshwar Rao: US tariffs may affect trade and financial markets.
• Rajiv Ranjan: External drag could impact GDP; domestic demand still strong.
• Ram Singh: Food inflation positive, but weather and global risks persist.
• Nagesh Kumar: Need to monitor global developments impacting growth.