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A Crisil report on Wednesday projected India's CPI inflation to average 4.3 per cent this fiscal (FY26) -- with food, fuel and core inflation at 4.6 per cent, 2.5 per cent and 4.2 per cent, respectively. 

This fiscal, “we expect food inflation to remain under control given the healthy rabi sowing, soft global food prices and the expected above-normal monsoon,” said the report.

The high base of last year will provide a downward (statistical) push to food inflation. The Indian Meteorological Department has forecast an above-normal monsoon for this fiscal, which should benefit the kharif crop.

“We expect non-food inflation to remain in the comfort zone with expectations of benign global commodity prices,” said the Crisil report.

However, it is important to remain vigilant about potential heat waves and other weather-related disruptions.

"We expect the Reserve Bank of India (RBI) to cut rates at least two more times by 25 bps each this fiscal given the benign inflation amid rising downside risks to growth. We expect lower interest rates, inflation and fiscal deficit target to bring down the yield on the 10-year government security to 6.4 per cent by March 2026 from 6.7 per cent in March 2025,” the report noted.

For fiscal 2025, headline inflation eased to 4.6 per cent from 5.4 per cent in fiscal 2024. The moderation was driven by record low core inflation at 3.5 per cent (vs 4.3 per cent in fiscal 2024), while food inflation was volatile and high at 7.3 per cent (vs 7.5 per cent).

That said, the fourth quarter of the fiscal saw a reversal in the trend with non-food inflation gaining ground and food inflation dropping sharply.

The March inflation print of 3.3 per cent provides comfort to policymakers amid rising risks to growth, the report mentioned.

Food inflation fell to 2.7 per cent, compared with 3.7 per cent in February, driven by cheaper vegetables and pulses. Vegetable prices fell sharper than usual this winter season, driving the decline in food inflation in the last few months.