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RBI nudges inflation outlook higher signals data reset and cautious pause after aggressive rate cuts
The Reserve Bank of India has marginally raised its near-term inflation projections while keeping policy rates unchanged, reflecting comfort with current price trends but caution about emerging statistical and structural shifts. The upcoming change in the CPI and GDP base year to 2024 is now a central variable in how inflation will be interpreted going forward.
By Finblage Editorial Desk
10:30 am
6 February 2026
In its first monetary policy review of 2026, the Monetary Policy Committee of the Reserve Bank of India chose to hold the repo rate steady after an aggressive 125 basis point easing cycle that began in February 2025. Yet, the policy action was not the real signal. The shift came through in the fine print of the inflation forecasts.
The RBI revised its CPI inflation projection for FY26 to 2.1 percent from 2 percent earlier. While the change appears minor, it comes at a time when headline inflation has been unusually soft. December CPI stood at 1.3 percent and inflation has remained below 2 percent for six consecutive months, largely driven by food deflation.
More telling were the changes in forward estimates. Inflation for Q4 FY26 was raised to 3.2 percent from 2.9 percent. For FY27, the central bank lifted Q1 inflation projection to 4 percent from 3.9 percent and Q2 to 4.2 percent from 4 percent.
This calibrated upward revision suggests that while current inflation readings are benign, the RBI does not view them as structurally sustainable.
Governor Sanjay Malhotra highlighted that core inflation, excluding volatile precious metals, is expected to remain range-bound. This indicates that the RBI is not yet seeing a resurgence in underlying price pressures. However, the policy commentary introduced a new dimension that could materially alter how inflation prints are interpreted in the coming months.
India is set to transition to a new macroeconomic data series, with the base year for GDP, CPI, and IIP shifting from 2011-12 to 2024. The Governor indicated that the new series will be rolled out “in a few days.”
This statistical revision is not cosmetic. Economists have warned that the new CPI series, beginning with the January data print, could introduce an upward bias of 20 to 40 basis points. This is due to higher weights for core components and the inclusion of newer services such as e-commerce and OTT platforms in the consumption basket.
As a result, future inflation prints may appear higher even if actual price pressures remain unchanged.
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