Rain, Rate Cuts And Risks: CRISIL Paints Mixed Economic Outlook For FY26

The agency said that food inflation is expected to be softer given the forecasts of above-normal monsoon by the Indian Meteorological Department (IMD).

The tariff moves by the US are seen as a risk for exports, while domestic factors like an adequate monsoon and repo rate cuts will be supportive of growth, the agency said.

Source : ABPLIVE AI

Rating agency Crisil, in its latest research report, said that the consumer price index (CPI)-based inflation is expected to average four per cent this financial year, as compared to 4.6 per cent last fiscal.

The agency said that food inflation is expected to be softer given the forecasts of above-normal monsoon by the Indian Meteorological Department (IMD).

Non-food inflation is expected to be subdued on the back of lower commodity prices, the report said.

CPI is the key measure used by the Monetary Policy Committee (MPC) of the RBI for targeting inflation.

According to Crisil, GDP growth is seen at 6.5 per cent with downside risks.

The tariff moves by the US are seen as a risk for exports, while domestic factors like an adequate monsoon and repo rate cuts will be supportive of growth, the agency said.

There is supportive liquidity in the system, which should aid the financial conditions of the economy, but capital flows are expected to be volatile along with the rupee, the report said Bank credit growth continued to be weak, it said.

Data available till May 2025 indicates softening in bank credit growth in the first quarter.

Crisil said the softening inflation would allow the MPC to cut the repo rate once again this fiscal, followed by a pause. However, global uncertainties could continue to impart volatility to capital flows and currency movements, the report said.

The MPC had cut the repo rate by 50 basis points at its June meeting, bringing it down to 5.5 per cent.

Global uncertainties had led to a surge in crude oil prices, which hit USD80 per barrel in June for the first time since January 2025. This has put pressure on the bond yields, equity markets and the rupee, the report added. 

(This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)