New Delhi: India’s inflation is likely to stay low in FY27, supported by well-stocked granaries, low oil prices, and other long-term factors that keep core inflation under control. According to a new report by HSBC Global Investment Research, these factors will help maintain price stability in the coming months.
HSBC noted that while it does not expect the Reserve Bank of India (RBI) to cut the repo rate further, there is a possibility of easing if economic growth slows down.
November inflation details
In November, the Consumer Price Index (CPI) inflation came in at 0.7 percent year-on-year, matching market expectations. On a month-on-month basis, prices rose 0.4 percent, but annual inflation remained low due to a high base effect from the previous year.
Excluding gold, the headline CPI even showed deflation at -0.1 percent, compared to -0.6 percent previously. Food prices remained in deflation for the third consecutive month annually, although they rose 0.5 percent month-on-month as vegetable prices increased after two months of decline. Prices of protein items like eggs, meat, and fish also saw small rises.
Core inflation and gold impact
Gold prices continued to keep core inflation elevated. With a weight of 1.1 percent in the CPI basket, gold prices rose 59 percent in November, contributing around 0.63 percentage points to CPI inflation. Excluding food, energy, housing, and gold, core inflation fell from 3.2 percent in Q3 FY25 to 2.5 percent in November.
Why food and core inflation remain low?
HSBC highlighted that strong cereal production, well-stocked granaries, and seasonal deflation are helping to keep food inflation under control. Additionally, a high base from last year, low global oil prices, and cheaper imports from China are expected to keep core inflation soft over the near term.
RBI forecasts and potential rate cuts
The RBI has lowered its H1 FY27 inflation forecast from 4.5 percent to 4 percent, while HSBC expects it could be around 3.5 percent, giving some space for potential easing of rates if economic growth slows. HSBC stressed that while inflation is under control, any rate cuts in the future would depend on growth conditions.
