The consumer price index inflation in April increased slightly to 3.48% from 3.40% in March. A report predicts that CPI-based inflation is likely to average 5.1% in fiscal 2027. Despite the ongoing conflict in West Asia for over 74 days, the risks to retail inflation are gradually materializing at a slow pace, indicating consumer protection.
The Reserve Bank of India’s Monetary Policy Committee is anticipated to maintain rates and stance unchanged in the upcoming monetary policy. Due to energy shock from supply chain disruptions, oil price forecasts have risen, with Brent crude expected to average $90-95 per barrel in FY27, marking a 32% increase year-on-year as per the report.
In April, electricity, gas, and fuel inflation eased due to base effects, while transport fuel inflation was controlled by the government’s decision to stabilize pump prices of petrol and diesel. Core inflation remained stable at 3.7% for the fourth consecutive month, as the expected impact of higher energy and input prices on consumers is yet to fully materialize.
Despite anticipated rises in inflation for restaurants, accommodation services, and household furnishings, a slower increase in precious metal inflation offered some relief. The report highlights concerns that retail fuel inflation could rise in the future, as producers are likely to transfer increased energy and input costs to consumers, potentially elevating core inflation.
The report also warns of potential challenges due to expected below-normal monsoon rainfall and possible El Niño conditions, along with ongoing heatwaves that may impact agricultural production and food inflation normalization from previous lows.
