SBI expects inflation in India to remain below 3 per cent in the first quarter of current fiscal

India's retail inflation is likely to stay below 3 per cent till June 2025, according to a recent report by the State Bank of India (SBI).

The report highlighted a sharp fall in consumer price inflation (CPI) in March 2025, which dropped to a 67-month low of 3.34 per cent, mainly due to a significant correction in food prices.

It said "The sharp moderation in CPI inflation, hitting a 67-month low of 3.34 per cent in Mar'25 due to sharp correction in food inflation bodes well for lowering the average CPI headline forecast for FY26 below 4 per cent now (with below 3 per cent in Q1FY26)".


This sharp moderation in food inflation is expected to help keep the average CPI inflation below 4 per cent for the full financial year 2025-26 (FY26).

SBI now expects CPI to remain below 3 per cent in the first quarter of FY26, which runs from April to June 2025.

The bank projected that the average inflation for the entire fiscal year could range between 3.7 and 3.8 per cent, unless there is an unexpected rise in food prices.

Core inflation, which excludes food and fuel, also saw some movement over the past year. It rose from a low of 3.28 per cent in August 2024 to 3.77 per cent in October 2024. Between November 2024 and January 2025, it remained steady in the range of 3.6 to 3.7 per cent.

However, core inflation picked up further to 4.1 per cent in February and March 2025--the highest in 15 months--mainly due to a sharp increase in gold prices, as investors turned to the precious metal amid global uncertainties.

Interestingly, if gold is excluded from the core inflation calculation, the figure drops significantly. Core inflation excluding gold stood at just 3.2 per cent, which is below both the core and overall CPI inflation numbers.

The report also expects core inflation, including gold, to range between 4.0 and 4.3 per cent in FY26.

With both inflation and GDP growth remaining low, SBI believes that the Indian economy is entering a "Goldilocks period"--a phase of stable growth with low inflation.

The bank forecasts nominal GDP growth of 9 to 9.5 per cent for FY26, slightly below the Union Budget estimate of 10 per cent.

SBI says this is an ideal time for the Reserve Bank of India to consider cutting policy interest rates.