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India's headline Consumer Price Index (CPI) inflation is projected at 5.1 per cent for the financial year 2026-27, marking an upward revision of approximately 50 basis points from earlier estimates. The revised trajectory comes on the back of rising global crude oil prices and escalating industrial input costs, which are expected to exert upward pressure on domestic consumer prices in the coming months.
According to the Monetary Policy Statement by Sanjay Malhotra, Governor, RBI, the domestic inflation trajectory faces immediate pressure from the energy sector. International crude oil prices for the Indian basket averaged around USD 110 per barrel over the past two months, significantly exceeding the USD 85 per barrel baseline assumed during the previous policy review. "CPI inflation for this year now is projected to be at 5.1%, about 50 basis points more than earlier projected, with Q1 at 4.2%, Q2 at 5.1%, Q3 at 5.9% and Q4 at 5.4%," Malhotra stated. "Core inflation is projected at 4.7% for this year," he said. RBI's MPC meet outcome shows an upward revision in inflation projections for FY27 compared to the last meeting. For Q1FY27 inflation projection has been raised from the previous 4 per cent, while Q2FY27 sees a notable jump from 4.4 per cent. The upward trend continues into the second half of the fiscal year, with Q3FY27 projected to rise from 5.2 per cent, and Q4FY27 expected to hike from the earlier estimates of 4.7 per cent. Overall, the full-year FY27 inflation projection has been increased from the prior expectation of 4.6 per cent. Additionally, the FY27 Core CPI projection has also been revised upward compared to its previous forecast of 4.4 per cent. The baseline projections indicate that domestic inflation will firm up toward the upper tolerance level during the third quarter of the current fiscal year before the impact of these global supply shocks begins to fade. "Although forming up marginally from 3.2% in February, headline CPI inflation was below the target during both March and April this year, in fact 3.4% and 3.5%, respectively," Sanjay Malhotra said. "While food inflation edged up, fuel inflation remained muted as retail prices of petrol and diesel were unchanged in March and April. Core inflation remained stable at 3.7% during March and April." The central bank governor stated that the partial pass-through of these higher global oil prices to domestic retail pumps commenced in May, alongside cost escalations across multiple industrial inputs. "Prices of several inputs such as commercial LPG, industrial raw materials, chemicals, base metals, rubber and plastic products, among others, have increased," Governor Malhotra said. "These would exert upward pressure on CPI inflation in the coming months as firms pass on these higher input costs." The monetary policy committee highlighted that while underlying inflationary pressures remain benign at this juncture, the domestic outlook is constrained by supply chain disruptions and a subnormal southwest monsoon forecast. The central bank indicated that it will maintain a close vigil on potential second-round effects on wages and inflation expectations, choosing to wait for clearer economic signals before shifting its policy stance. "The MPC was of the opinion that there are considerable risks to the baseline assessment of inflation and growth," Malhotra said. "Although risks of higher inflation have amplified, the MPC felt it would be prudent to wait for greater clarity to emerge." (ANI)
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