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Informist, Monday, Apr. 13, 2026

 

By Shubham Rana

 

NEW DELHI – The outbreak of war in Iran, which pushed up energy prices and choked supplies, had little impact on retail prices in India in March, government data released Monday showed. But as US-Iran peace talks failed to yield results, a prolonged war in West Asia could start hurting Indian consumers in the coming months, economists said.

 

CPI inflation rose to a one-year high of 3.4% in March, driven by higher food and utilities inflation. 'Electricity, gas and other fuel' inflation jumped to 1.65% in March from 0.14% in February, reflecting the impact of the hike in cooking gas prices last month.

 

Despite the rise, inflation was in line with expectations. "This confirms that despite the rise in energy costs in the month of March, the pass-through to retail inflation has been limited," Sakshi Gupta, principal economist at HDFC Bank, said. "That said, continued disruptions and elevated energy prices for an extended period of time could ultimately be passed on to consumers if producers continue to face margin pressures."

 

A continued war in West Asia and high energy prices could lead to a more widespread increase in CPI inflation, economists said. According to ICRA Chief Economist Aditi Nayar, the impact of the war in West Asia will feed into prices of alternative fuels, airfares, and restaurants.

 

ICRA forecasts headline inflation to rise above the Reserve Bank of India's medium-term target of 4% in April. The last time CPI inflation topped 4% was in January 2025.

 

Last week, the RBI projected CPI inflation to rise to 4.0% in the June quarter and average 4.6% in the current financial year. But the central bank's projections assume crude oil prices at $85 a barrel, much lower than the average price of $100 a barrel since the start of the war on Feb. 28.

 

The RBI's monetary policy report said that if crude prices average $95 per barrel in FY27, CPI inflation may rise to 5% during the year. A sustained rise in crude prices could also force the government to raise pump prices of petrol and diesel.

 

"With no immediate end in sight, continued pressure on global crude oil and gas prices indicate an imminent increase in pump prices of both petrol and diesel," Barclays said in a report. According to economists at the bank, every 10% increase in pump prices would push headline CPI inflation directly by around 48 bps. Even without any hike in fuel prices, CPI inflation is likely to rise to 4.2% in April, Barclays said.

 

Adding to the risks for inflation, the India Meteorological Department has forecast below-normal southwest monsoon rainfall this year at 92% of the long-period average. According to ICRA, this is the lowest first long-range forecast in at least 26 years.

 

Below-normal monsoon rains pose significant risks to food output and prices. While ample reservoir levels vis-a-vis historical averages provide some comfort, the average CPI inflation for FY27 could well exceed 4.5%, Nayar said.

 

The RBI's Monetary Policy Committee, which held the repo rate at 5.25% last week, may face a challenging policy decision at its next meeting in June if the war persists.

 

"The RBI is anticipated to maintain its current policy stance, leaving the repo rate unchanged at 5.25% for now," ANZ Banking Group said in a report. "Should inflation remain elevated without moving toward the 4% target over the forecast horizon at upcoming policy meetings later this year, monetary policy tightening measures may be considered to re-anchor inflation and inflation expectations."  End

 

US$1 = INR 93.38

 

Edited by Avishek Dutta

 

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