New Delhi: India’s Consumer Price Index (CPI) for Q4 FY26 is expected at 2.6%, lower than the RBI’s projection of 2.9%, according to a report by the Union Bank of India. This has been attributed to lower inflation for the four consecutive months, mostly on the back of a stronger agricultural output and the pre-Diwali GST reforms.
Despite the challenges to exports due to the US tariff regime, India has managed to grow at 7.3% this year, with the Asian Development Bank forecasting a growth rate of 7.2% for 2026.
This lower-than-expected CPI inflation could open up space for the RBI to cut interest rates by 25 basis points, though this may be possible given there are no adverse geopolitical or weather events that could make an impact here.
Through close monitoring of the CPI inflation and movements in global commodity prices, domestic food price movements and weather-related uncertainties, there could be slight changes in inflation or affect the supply of leading commodities, the report stated.
The RBI had already cut the repo rate by 5.25 bps in December, encouraged by the deflatory pressure in the economy. Though there is a chance of a rate cut following the RBI’s Monetary Policy Committee (MPC) meeting on February 4, this remains a remote possibility, as uncertain commodity prices and geopolitical tensions could influence the RBI’s decisions.
