What Lies Ahead for India's Inflation? RBI's Latest Projections Explained

The Reserve Bank of India has projected retail inflation for the current financial year at 4.6%, staying within the government's target range. Despite previous confidence in India's economic fundamentals, geopolitical tensions have raised concerns. RBI Governor Sanjay Malhotra outlined expected inflation rates for each quarter and emphasized the need for caution due to rising energy prices and potential weather disruptions. The MPC has decided to keep the repo rate unchanged at 5.25%. This article delves into the implications of these projections for the Indian economy.

By Narendra Chaudhary Apr 8, 2026, 12:00 IST

RBI's Inflation Forecast for the Current Financial Year

Mumbai: On Wednesday, the Reserve Bank of India (RBI) announced its projection for retail inflation for the ongoing financial year, estimating it at 4.6 percent. This figure falls comfortably within the government's target range of 4 percent, allowing for a tolerance of +/- 2 percent.

Prior to the escalation of the conflict in West Asia, India's economic indicators were promising, showcasing robust growth alongside low inflation rates. However, the situation deteriorated in March as the conflict expanded and intensified.

According to RBI Governor Sanjay Malhotra, the consumer price index (CPI) based retail inflation is anticipated to be 4 percent for the April-June quarter (Q1), 4.4 percent for Q2, 5.2 percent for Q3, and 4.7 percent for Q4. This announcement was made during the release of the first bi-monthly monetary policy for the current fiscal year.

Malhotra noted that the Monetary Policy Committee (MPC) convened for three days to discuss the benchmark interest rate (repo) and observed a significant increase in geopolitical uncertainties since their last meeting.

"While headline inflation remains under control and below the target, there are rising risks to the inflation outlook due to escalating energy prices and potential weather-related disruptions impacting food costs," the Governor stated.

He also mentioned that core inflation pressures are currently subdued, but disruptions in supply chains and the risk of secondary effects create uncertainty regarding future inflation trends.

Malhotra emphasized that the economy is facing a supply shock, advising a cautious approach to monitor the evolving circumstances and the growth-inflation outlook, which led the MPC to maintain the repo rate at 5.25 percent.

In February, retail inflation rose to 3.21 percent, based on the new CPI series with a base year of 2024.

The government has tasked the central bank with the responsibility of keeping inflation at 4 percent, with a permissible margin of 2 percent on either side.