The outlook for India’s retail inflation has eased further, as per a recent report brought out by ratings agency, Crisil. According to Crisil's projections, headline Consumer Price Index (CPI) inflation is pegged at 3.2% for fiscal 2026, down from its earlier estimate of 3.5%. The rating agency believes that this moderation, which is almost 140 basis point drop from last year, comes due to lower crude prices, healthy kharif sowing, and the impact of GST rate cuts.

The rating agency said that this inflation trajectory could translate into another 25-basis-point rate cut this year by the Reserve Bank of India (RBI).

Crisil's latest report comes on the back of the inflation data released by the Ministry of Statistics and Programme Implementation (MoSPI) earlier today. As per the government's data, India's retail inflation rate rose to 2.07% for the month of August, compared with 1.61% in July. Food inflation, however, saw a year-on-year decline of 0.69% in August 2025. However, when seen month-over-month, food prices rose by 107 basis points.

"Retail inflation this fiscal has been lower than expected, averaging 2.4% in the first five months. In the coming months, a fading base effect and stronger demand due to festive sales will lift CPI inflation rate but will keep the uptick benign," Crisil noted in its report.

Crisil also said that it believes a fading base effect and stronger consumer demand from the upcoming festive season will nudge inflation higher in the coming months, but the increase will remain muted. Low crude oil prices, in the range of $62–67 per barrel for the year, along with a 2.9% on-year rise in kharif sowing as of August-end, could contain the pressures on food and fuel prices.

Still, risks remain. As per the report, heavy rains and flooding in key agricultural states, like Punjab, could lead to clouded prospects for foodgrain and horticulture crops.

"A brewing risk, however, lies in excessive rains during the kharif season, which could disrupt key horticulture and foodgrain-growing regions," said Crisil.  

"Cumulative rainfall for the season has been a surplus of 33% in the northwest, 11% in central India and 8% in the south peninsula, while 20% deficient in the northeast. Abundant rains should improve soil moisture creating conducive conditions for the rabi crop," Crisil highlighted.

"Food inflation has stayed in the negative zone for three months now, with August printing -0.7%. The lower deflation rate was led by a somewhat adverse base effect and sequential uptick in key food categories such as cereals and pulses. On-month, food prices inched up 0.8% on a seasonally adjusted basis. According to Crisil Intelligence's Thali Index, the cost of a vegetarian thali decreased by around 7% on-year in August, while the  cost of a non-vegetarian thali dropped ~8%, driven by the prevailing benign commodity prices," the ratings agency further noted.