Abundant rainfall to improve agricultural output, keeping food inflation in check: S&P Global

S&P Global Ratings

Abundant rainfall is expected to improve agricultural output and help maintain momentum in the rural economy, keeping food inflation in check, said S&P Global Report.

The report added that as inflation softens, this should support urban consumption, which is yet to show signs of a decisive lift. While consumption in rural areas continues to exhibit robust growth, urban consumption is comparatively subdued. The income tax cuts announced in the budget, effective this fiscal year, should bolster this, the report added.

The proposed goods and services tax rationalisation could help bring down inflation and support private consumption. A sharp drop in food inflation would also improve the discretionary spending of lower-income groups in urban and rural areas, the report said.

Essential items such as food and fuel account for a larger share of the consumption basket for lower-income households.

Crisil estimates from June 2025 show that the lowest-income 20 percent of the population faces lower headline inflation than the highest-income 20 percent in urban and rural areas. For instance, in the first quarter of fiscal 2026, the lowest-income 20 percent of the urban population faced 2.4 percent inflation, while the highest-income 20 percent faced 3.1 percent inflation. There are similar trends in rural consumption, the report added.

According to Crisil, crude oil prices are projected to average $65-$70 per barrel in fiscal 2026, compared with $78.8 per barrel in fiscal 2025. Lower crude oil prices contribute to reduced inflation and a smaller current account deficit (CAD), supporting the economy in India.