Mumbai, Dec 5: The Reserve Bank of India (RBI) has revised its inflation projection for the current fiscal year down to 2 per cent from the previous estimate of 2.6 per cent. This adjustment comes as the economy experiences significant disinflation. Notably, for the first time since the introduction of Flexible Inflation Targeting (FIT) in 2016, the average headline inflation for the second quarter of 2025-26 fell to 1.7 per cent, dipping below the lower tolerance threshold of 2 per cent set for the inflation target of 4 per cent. In October 2025, inflation reached an unprecedented low of just 0.3 per cent.

RBI Governor Sanjay Malhotra attributed this rapid decline in inflation to a correction in food prices, which is unusual for the September-October period. He noted that core inflation, which excludes food and fuel, remained stable despite ongoing price pressures from precious metals. Excluding gold, core inflation was recorded at 2.6 per cent in October.

Looking ahead, Malhotra expressed optimism about food supply, citing improved kharif production, healthy rabi sowing, adequate reservoir levels, and favorable soil moisture conditions. He also mentioned that, apart from certain metals, international commodity prices are expected to decrease.

"Overall, inflation is likely to be softer than what was projected in October, mainly on account of the fall in food prices," Malhotra stated. The RBI now projects retail inflation for 2025-26 at 2 per cent, with estimates of 0.6 per cent for the third quarter and 2.9 per cent for the fourth quarter. For the first and second quarters of 2026-27, CPI-based retail inflation is expected to be 3.9 per cent and 4.0 per cent, respectively. Malhotra also indicated that underlying inflation pressures are lower, with the impact of rising precious metal prices estimated at about 50 basis points, and he noted that the risks are evenly balanced.