Leading ratings and economic research firm CRISIL projects that inflation is expected to average 4.5% for the current financial year.
“Assuming a normal monsoon, we expect food inflation to soften, while non-food inflation could see an uptick but is expected to remain soft on the back of benign commodity prices,” CRISIL said.
The rating firm said that consumer price index (CPI) inflation moderated marginally to 4.75% in May, from 4.8% in April 2024.
“Non-food categories pulled down the headline inflation, but what is worrying is the relentless inching up of food categories, cereals and pulses,” the CRISIL report said.
Food inflation had stayed above 8.5% for four months now, and non-food inflation continued to offer some respite, it said.
The report maintained that there could be some rebalancing in domestic demand in the current fiscal with rural demand catching up with urban consumption.
According to the report, the expectation of an above-normal monsoon augurs well for rural incomes.
The urban economy could be tempered by tighter credit conditions, CRISIL said. Bank retail credit growth has moderated in recent months, while regulatory measures aimed at restricting bank lending to NBFCs will also trickle to consumer loans.
“Notwithstanding healthy government capital expenditure, it is expected to be lower than the previous year with fiscal consolidation being pursued,” the report said.
Slower global growth can restrict upside in goods exports, it said, adding the GDP to slow down to 6.8% this fiscal from 8.2% in the previous year.
Edited by Jyoti Narayan
