Mumbai: Recent changes in vegetable prices have significantly improved India's food inflation outlook, as stated in the Minutes from the latest RBI monetary policy meeting. This positive trend is also supported by anticipated record wheat output and increased pulse production.
A broad and noteworthy seasonal decrease in vegetable prices has been observed. Concerns surrounding Rabi crop conditions have notably diminished, and the second advance estimates suggest unprecedented wheat production along with enhanced yields for major pulses when compared to the previous year.
"With strong kharif arrivals contributing positively, a lasting decrease in food inflation seems likely. A notable drop in inflation expectations for both the three-month and one-year periods could help stabilize inflation expectations moving forward," noted the RBI minutes.
In addition, the decrease in crude oil prices is advantageous for the inflation outlook.
"However, worries over persistent global market instability and the possibility of recurring weather-related supply disruptions present potential upward risks to the inflation path," the minutes indicated.
Considering these aspects, and presuming normal monsoon conditions, the Consumer Price Index (CPI) inflation for the financial year 2025-26 is anticipated to be 4. 0 percent, with projections for Q1 at 3. 6 percent; Q2 at 3. 9 percent; Q3 at 3. 8 percent; and Q4 at 4. 4 percent, with risks balanced.
The RBI minutes highlighted the rapidly changing global economic landscape. The recent measures related to trade tariffs have intensified the uncertainties affecting economic prospects worldwide, presenting new challenges for global growth and inflation.
"The financial markets have reacted with a sharp decline in the dollar index, equity sell-offs, and a significant softening of bond yields and crude oil prices," it added.
The Reserve Bank of India has recently revised down its growth projection for the current fiscal year 2025-26 to 6. 5 percent from the earlier 6. 7 percent due to uncertainties linked to trade conflicts arising from the tariffs enacted by the US.
According to the National Statistics Office (NSO), real Gross Domestic Product (GDP) growth is estimated at 6. 5 percent for 2024-25, following a growth of 9. 2 percent in 2023-24.
The Monetary Policy Committee (MPC) convened for its latest meeting from April 7 to 9, 2025, chaired by RBI Governor Sanjay Malhotra.
The MPC unanimously decided to reduce the policy repo rate by 25 basis points to 6. 00 percent, effective immediately.
This decision aligns with the goal of achieving the medium-term target of 4 percent for consumer price index (CPI) inflation within a range of (+/-) 2 percent while supporting economic growth. Inflation has been a concern for numerous countries, including advanced economies; however, India has successfully maintained a relatively stable inflation trajectory.
Typically, the RBI holds six bimonthly meetings each fiscal year to discuss interest rates, money supply, inflation prospects, and various macroeconomic indicators. The remaining five meetings are slated for June 4-6, August 5-7, September 29-October 1, December 3-5, and February 4-6.
The RBI Monetary Policy Committee (MPC) comprises six members—three from the RBI, including the Governor, and three external members appointed by the central government.
