Mumbai, Apr 9 (PTI) The Reserve Bank on Wednesday lowered the inflation projection for the current fiscal to 4 per cent from 4.2 per cent earlier, taking into account good agricultural output and falling crude prices.

Consumer Price Index (CPI) based headline retail inflation declined by a cumulative 1.6 percentage points during January-February 2025, from 5.2 per cent in December 2024 to a low of 3.6 per cent in February 2025.

On the back of a strong seasonal correction in vegetable prices this year, food inflation dropped to a 21-month low of 3.8 per cent in February.

Unveiling the first bi-monthly monetary policy of financial year 2025-25, RBI Governor Sanjay Malhotra said the outlook for food inflation has turned decisively positive.

There has been a substantial and broad-based seasonal correction in vegetable prices.

"On the inflation front, while the sharper-than-expected decline in food inflation has given us comfort and confidence, we remain vigilant to the possible risks from global uncertainties and weather disturbances," the governor said.

He further said the uncertainties on rabi crops have abated considerably and the second advance estimates point to a record wheat production and higher output of key pulses over the last year.

Along with robust kharif arrivals, this is expected to set the stage for a durable softening in food inflation, the governor said.

Sharp decline in inflation expectations for three months and one year ahead period would help anchor inflation expectations going ahead, the central bank said.

Furthermore, the fall in crude oil prices augurs well for the inflation outlook, said the Monetary Policy Statement, 2025-26 Resolution of the Monetary Policy Committee (MPC).

On the other hand, there are concerns on lingering global market uncertainties and recurrence of adverse weather-related supply disruptions pose upside risks to the inflation trajectory.

Taking all these factors into consideration, and assuming a normal monsoon, Malhotra said CPI inflation for the financial year 2025-26 is projected at 4 per cent, with Q1 at 3.6 per cent; Q2 at 3.9 per cent; Q3 at 3.8 per cent; and Q4 at 4.4 per cent. The risks are evenly balanced.

The government will release the retail inflation numbers next week. PTI NKD CS HVA

Inflation projection lowered on improved agricultural output and falling crude; global uncertainty and weather risks persist. The central bank lowered the CPI inflation projection for FY 2025-26 to four percent, citing stronger agricultural output, a substantial seasonal correction in vegetable prices, and falling crude oil prices as primary disinflationary drivers. Recent CPI data show a marked decline in headline inflation and food inflation, supported by improved rabi estimates and robust kharif arrivals. The projection assumes a normal monsoon but notes upside risks from global market uncertainty and weather related supply disruptions; the Monetary Policy Committee described the balance of risks as even while setting quarterly inflation paths.