Stable global crude prices, GST rate cuts to check inflation in FY27

New Delhi, Dec 6 (IANS) Though average inflation will rise in FY27, the upside will be limited by stable global crude prices, positive impact from GST rate cuts and muted price pressures from excess capacity in China, a report said on Saturday.

“We maintain our full-year growth forecast at 7.5 per cent for FY26. Growth momentum in the year so far has been buoyed by income tax reductions, GST rate rationalisation and lower interest rates,” said the report from ratings agency Care Edge Ratings.

Even with global uncertainties lingering, we expect GDP growth at 7 per cent in FY27, it said, adding the Reserve Bank of India’s unanimous 25‑basis‑point repo rate cut to 5.25 per cent leverages benign inflation to stimulate growth.

Moreover, the announced liquidity measures scheduled for December underscore the central bank’s commitment to maintaining comfortable liquidity conditions to ensure smoother policy transmission.

“Amid sustained easing in inflation and a favourable food price outlook, the RBI has revised its full-year inflation forecast for FY26 to 2 per cent from the earlier forecast of 2.6 per cent. This is broadly in line with our forecast of 2.1 per cent,” the report noted.

Care Edge forecast growth momentum to moderate in H2FY26 as the support from export front-loading, the festive season-led consumption boost, and the low base wanes.

On the food inflation front, prices will remain at moderate levels, supported by favourable agricultural prospects on the back of higher Kharif production, encouraging Rabi sowing and comfortable reservoir levels, it said.

The Indian economy grew by a better-than-expected 8.2 per cent in Q2 FY26, following a high growth of 7.8 per cent in Q1. This growth performance was aided by a sharp uptick in industrial growth, mainly led by the manufacturing sector and continued momentum in the services activity.

The higher growth print was also supported by an improvement in consumption demand following policy measures such as income tax reductions and GST rationalisation.

The easing inflationary scenario and early festive season demand also boded well for consumption.

–IANS

aar/rad