Inflation to reach Target in FY26: RBI’s State of the Economy Report

Current Context: The Reserve Bank of India (RBI) has released a State of the Economy Report. The report observes that a durable alignment of headline retail inflation with the target of 4 per cent could be possible.

• This alignment could recommence in the second half of FY25.
• It is expected to sustain until numbers closer to the target are seen.
• These closer numbers are anticipated to be observed during FY26.
• This means that the inflation rate is expected to reach the target of 4% in FY26.
• The RBI has projected the Consumer Price Index (CPI) inflation of 4.5 per cent in FY25, with Q1 at 4.9 per cent; Q2 at 3.8 per cent; Q3 at 4.6 per cent; and Q4 at 4.5 per cent.
• However, the prices of vegetables, cereals, pulses, meat, and fish in the food category may keep the headline elevated and closer to 5 per cent in the near term.

Question:

1. What is the target of headline retail inflation as per the RBI’s State of the Economy Report?

• A) 3%
• B) 4%
• C) 5%
• D) 6%

Answer: B) The Reserve Bank of India (RBI) has released a State of the Economy Report. The report observes that a durable alignment of headline retail inflation with the target of 4 per cent could be possible.