SBI sees inflation below RBI projections, calls it a regulatory policy too

NEW DELHI — Inflation in India during the current financial year and the next (FY26 and FY27) is expected to be much lower than the Reserve Bank of India’s (RBI) projections, according to a report by the State Bank of India (SBI). 

The report argued that the central bank’s approach should not be seen only as “monetary policy” but also as a broader “regulatory policy” that reflects India’s unique economic conditions.

SBI highlighted that several domestic factors are easing price pressures, such as the good progress of the monsoon, higher kharif sowing, strong reservoir levels, adequate foodgrain stocks, and the recent rationalisation of GST rates.

These factors, it said, are helping bring inflation under control faster than expected.

Taking these into account, the RBI had recently lowered its consumer price index (CPI) inflation projection for FY26 by 50 basis points to 2.6 per cent.

This is a sharp cut of 160 basis points compared to its April estimate. However, SBI believes that actual inflation in both FY26 and FY27 will likely be even lower than these revised numbers.

"RBI has revised downwards its FY26 CPI inflation projection by 50 bps to 2.6 per cent (a 160 basis point downward revision from April levels). We believe both FY26 and FY27 inflation numbers are likely to be much lower," the report said.

Alongside this, the RBI has also raised its growth outlook for FY26, projecting real GDP growth at 6.8 per cent.

For FY27, inflation has been projected at 4.5 per cent, though the SBI report expects the numbers to fall below this.

The report further said that in the face of global uncertainties and volatile markets, the Monetary Policy Committee’s (MPC) decision to keep rates unchanged appears logical.

It added that the RBI’s communication plays a key role in guiding expectations and ensuring clarity in its policy direction.