Big relief- Inflation expected to fall more than you imagine; SBI’s report reveal

Inflation: Big relief for India’s middle class people. The GST rate cut is expected to significantly reduce inflation in the country. According to a new report, consumer price index (CPI)-based inflation could decline by around 0.35 percent (35 basis points) in the current financial year (FY26).

The State Bank of India (SBI) report said that this decline in inflation will be mainly due to lower food prices and tax relief. According to the SBI report, food inflation has remained consistently low due to a good Kharif harvest, robust Rabi sowing, adequate water in reservoirs, and soil moisture. Consequently, SBI has lowered its inflation forecast for fiscal year 2025-26 to 1.8 percent, while it is projected to be 3.4 percent for fiscal year 2026-27.

Furthermore, the inflation forecast for the first quarter of fiscal year 2027 has also been reduced by 100 basis points to 3.9 percent. The Reserve Bank of India (RBI) also lowered its inflation forecast. In its December monetary policy, it lowered its inflation forecast for fiscal 2026 to 2 percent, down from 2.6 percent in October and 4.2 percent in February.

The central bank believes that further changes in interest rates will be made based on economic data, but indications are that the repo rate may remain around 5.25 percent for a long time. Meanwhile, according to a Crisil report, average CPI inflation is expected to be around 2.5 percent in fiscal year 2025-26. The GST rate cut has benefited daily consumer goods, leading to a decline in core inflation except for gold. This has particularly positively impacted the prices of packaged foods, non-alcoholic beverages, snacks, and prepared foods.

The report states that inflation impacts different income groups differently. Poor and rural households spend a large portion of their income on food and fuel, so they have received the most relief from low food inflation. Inflation may rise slightly in the coming months as the base effect on food items dissipates, but lower crude oil prices and GST reductions will help keep inflation under control.