Mumbai, Apr 8: The inflation in India may remain below 4 per cent in the first half of the financial year 2025-26 (FY26), said a report by State Bank of India (SBI).This could be the first time inflation stays below 4 per cent for two quarters in a row in recent years. The report said, “US has imposed reciprocal tariffs to many economies that is more than India’s….This will increase the fear of dumping into India by these countries, resulting in lower inflation.”
It noted that the consumer price index (CPI) inflation is expected to fall to 3.8 per cent in the fourth quarter of FY25. For the full year FY25, average inflation may be around 4.6 per cent.
Based on this trend, SBI expects inflation to come down to 3.9-4.0 per cent in FY26. Core inflation, which excludes food and fuel prices, is likely to stay in the range of 4.2-4.3 per cent.
The report also said that headline inflation will continue to move downwards till September or October 2025. After that, there is a possibility it may rise again. It also pointed out a global factor that could impact India’s inflation.
The United States has imposed reciprocal tariffs on several countries. These tariffs are higher than the ones India has placed. As a result, there is a fear that other countries may start dumping their goods in India at cheaper prices.
This could lead to a further drop in inflation levels in the country. The report also gave an update on India’s current account balance.
Based on the latest trade and services data, it expects India’s current account to be in surplus in the fourth quarter of FY25. India’s current account deficit (CAD) stood at USD 11.5 billion in the third quarter of FY25.
This was 1.1 per cent of the country’s GDP. It was slightly higher than the CAD of USD 10.4 billion (also 1.1 per cent of GDP) in the same quarter last year, but lower than the deficit of USD 16.7 billion (1.8 per cent of GDP) seen in the second quarter of FY25.
The merchandise trade deficit increased to USD 79.2 billion in the third quarter of FY25 from USD 71.6 billion in the same period of the previous year.