Kolkata, Aug 13 (PTI) Ratings firm Crisil said that headline inflation is expected to average 3.5 per cent this fiscal as compared to 4.6 per cent in the last financial year.

In its research report for August, the rating agency said that healthy agricultural production is likely to keep food inflation in check.

The kharif sowing is up a healthy four per cent year-on-year as of August 8.

"We expect headline inflation to average 3.5 per cent this fiscal from 4.6 per cent in the last," Crisil said in its research report.

Headline inflation is defined as a rise in prices of all items in the CPI, including food and energy.

Assuming geopolitical uncertainties remain under control, Brent crude oil prices are projected to be subdued at USD60 to USD65 per barrel in the current financial year, which should help contain non-food inflation, the report said.

Crisil said another bout of repo cut is expected this fiscal. A cumulative cut of 100 basis points so far, along with adequate liquidity, has ensured a swift transmission down the line.

India's retail inflation rate has more than halved over the past year, slipping even below the lower end of the Reserve Bank of India's tolerance band of two per cent. It slid to 1.6 per cent in July from 2.1 per cent in June.

The sharp fall in retail inflation should buoy household purchasing power, particularly in the lower-income segments. This will create room for further monetary policy easing, the report added. PTI DC BDC

Monetary policy easing could proceed as headline inflation is projected lower, creating room for further repo rate reductions. Crisil forecasts a lower average headline inflation for the fiscal year driven by healthy agricultural production that will limit food inflation and by subdued crude oil prices constraining non-food inflation. Assuming geopolitical stability, the agency expects further monetary policy easing, including another round of repo rate cuts, citing that prior cumulative easing and adequate liquidity have ensured swift transmission and bolstered household purchasing power.