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India’s inflation has entered a new phase. After six years of battling above-target inflation, through the pandemic, wars and food price shocks, headline inflation finally appears set to sustainably undershoot the Reserve Bank of India’s (RBI’s) midpoint target of 4 per cent in 2025-26. If this disinflationary trajectory holds, the scope for monetary policy to support growth would be much greater than most expect.
Why sub-4 per cent inflation is here to stay
While a sustained period of sub-4 per cent inflation sounds ambitious, we see multiple favourable demand- and supply-side factors.
First, the starting point is benign. Headline inflation
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