India’s inflation is expected to gradually rise toward more normal levels over the next year, but without causing stress to the economy, according to the Reserve Bank of India (RBI). The central bank’s latest projections show that consumer price inflation is likely to hover around 4% in FY2026–27, a level the RBI considers ideal for sustainable growth.
Speaking after the Monetary Policy Committee’s recent review, RBI Governor Sanjay Malhotra said the modest rise in inflation reflects improving economic activity rather than runaway price pressures. For the current financial year, inflation is expected to remain low at about 2.1% on average, before inching up to around 3.2% in the final quarter as demand strengthens.
Looking ahead, the RBI expects inflation to average about 4.0% in the first quarter of FY27 and 4.2% in the second quarter. This upward revision, the central bank explained, is driven by normalisation in food prices, steady domestic demand, and global commodity trends. Importantly, inflation is still projected to stay well within the RBI’s comfort band of 2% to 6%.
Against this backdrop, the RBI chose to keep the repo rate unchanged at 5.25% and maintain a neutral policy stance. This decision is aimed at supporting economic growth while remaining alert to any risks to price stability. Stable interest rates help keep borrowing costs predictable for households and businesses.
For consumers, this means prices of everyday essentials are likely to rise slowly and steadily, rather than sharply. For businesses, steady inflation and unchanged rates provide confidence to plan investments, expand operations, and hire more people. Economists say this environment supports sustained growth without overheating the economy.
The RBI also said it will closely monitor food prices, global oil markets, precious metals, and geopolitical developments that could affect inflation going forward.