Mumbai (Maharashtra) [India], April 9 : The Reserve Bank of India (RBI), in its monetary policy announcement on Wednesday, said that inflation is expected to remain under control in the financial year 2025-26.
The RBI Governor Sanjay Malhotra projected Consumer Price Index (CPI) inflation for the year at 4.0 per cent, assuming a normal monsoon. This is lower than current levels and shows improvement in price stability.
He said "On the inflation front, while the sharper-than-expected decline in food inflation has given us comfort and confidence, we remain vigilant to the possible risks from global uncertainties and weather disturbances".
According to the RBI, food inflation outlook has turned positive. Vegetable prices have seen a broad and significant seasonal decline. For FY26, inflation is expected to be 3.6 per cent in the first quarter, 3.9 per cent in the second quarter, 3.8 per cent in the third quarter, and 4.4 per cent in the fourth quarter. The central bank said risks to inflation are evenly balanced.
The RBI also highlighted that India's foreign exchange reserves remain strong. As of April 4, 2025, reserves stood at USD 676.3 billion, enough to cover about 11 months of imports. The external sector remains resilient with healthy remittance and services receipts, which are expected to offset the trade deficit.
RBI also highlighted that the net FDI inflows declined to USD 2.5 billion in April-January 2024-25 from USD 11.5 billion a year ago. Around 80 per cent of FDI came from countries like Singapore, Mauritius, the USA, UAE, Netherlands, and Japan.
Most of the FDI equity inflows were directed towards sectors such as manufacturing, financial services, electricity generation and distribution, communication services, retail and wholesale trade, and computer services. These sectors together accounted for 77 per cent of the total equity inflows.
It also mentioned that the net foreign portfolio investment (FPI) inflows stood at USD 1.7 billion in 2024-25, driven by higher investments in the debt segment, even as the equity segment saw outflows. External commercial borrowings and non-resident deposits also recorded higher inflows compared to last year.
Governor said "Net FPI inflows to India stood at 1.7 billion US dollars during 2024-25, supported by debt inflows as the equity segment recorded net outflows. External commercial borrowings and non-resident deposits, on the other hand, witnessed higher net inflows compared to that last year"
The RBI also lowered its GDP growth forecast for FY26 to 6.5 per cent from 6.3-6.7 per cent earlier, citing global uncertainties. The central bank said merchandise exports could face pressure due to global trade disruptions, but services exports are expected to stay strong.
The quarterly GDP growth is revised at 6.5 per cent in Q1, 6.7 per cent in Q2, 6.6 per cent in Q3, and 6.3 per cent in Q4.
Manufacturing activities are showing signs of revival with robust business expectations, Investments are gaining traction, Urban consumption is gradually picking up with increased discretionary spending.
Global growth is slowing down because of trade uncertainty, potentially affecting commodity and crude oil prices, and trade frictions are likely to negatively impact domestic growth and net exports.
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