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Informist, Wednesday, Apr. 8, 2026

 

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--RBI Malhotra: Projects FY27 CPI inflation at 4.6%
--RBI Malhotra: Retains Apr-Jun CPI inflation forecast at 4.0%
--RBI Malhotra: Revises Jul-Sept CPI inflation to 4.4% from 4.2?rlier
--RBI Malhotra: Projects Oct-Dec CPI inflation at 5.2%
--RBI Malhotra: Projects Jan-Mar CPI inflation at 4.7%
--RBI Malhotra: Projects FY27 core CPI inflation at 4.4%
--RBI Malhotra: Will give core CPI inflation forecasts in the future
--RBI Malhotra: Risks to inflation forecasts are to the upside
--RBI Malhotra: MPC members say headline CPI contained, below target
--RBI Malhotra: Underlying price pressures benign in recent months
--RBI Malhotra: Recent spike in energy prices a risk to inflation
--RBI Malhotra: Higher global energy prices passed through in some fuel items
--RBI Malhotra: Likely El-nino conditions can pose risk to inflation
--RBI Malhotra: Shortage of inputs have stoked inflation fears
--RBI Malhotra: Core inflation pressures remain muted
--RBI Malhotra: MPC members see upside risks to headline CPI have increased
--RBI Malhotra: Upside risks to inflation outlook on high energy prices
--RBI Malhotra: Risks make future inflation trajectory uncertain
--RBI Malhotra: High crude prices can increase inflation, widen CAD
--RBI Malhotra: Govt measures to mitigate adverse impact of West Asia war
--RBI Malhotra: Econ confronted with suppply shock, prudent to wait, watch
--RBI Malhotra: Thought it prudent to wait and watch, assess balance of risks
--RBI Malhotra: Disruption in energy mkts may hurt industry, agri, svcs
--RBI Malhotra: Govt has been proactive to minimise supply chain disruption
--RBI Malhotra: Initial supply shock can change to demand shock in medium term
--RBI Malhotra: Overall supply shock can become a demand shock over time
--RBI Malhotra: Remain vigilant of evolving global situation
--RBI Malhotra: To put in place policies for best interest of econ

NEW DELHI – The Reserve Bank of India Wednesday projected headline inflation to average 4.6% in 2026-27 (Apr-Mar) and after more than a year of risks to inflation being "evenly balanced", Governor Sanjay Malhotra said that risks to inflation forecasts are on the upside. The risks particularly emanate from the war in West Asia, Malhotra said, with energy prices and their second-order impact clouding the inflation trajectory. The central bank kept the inflation forecast for Apr-Jun unchanged at 4.0%. 

 

"The ongoing conflict has led to large volatility in international energy and other commodity prices, imparting considerable uncertainty to the near-term inflation outlook," Malhotra said in his monetary policy statement on Wednesday. "Headline inflation remains contained and below the target, but upside risks to the inflation outlook have increased, driven by increased energy price pressures and probable weather disturbances affecting food prices," he added. 

 

The central bank's view on inflation for FY27 is in line with economists' view, who now expect inflation to average 4.5-5% this year, 50 basis points higher than previously projected. The US-Israel war on Iran, which started on Feb. 28, has dented oil and gas supply due to attacks on oil refineries in the West Asia region and also because of the closing of the Strait of Hormuz. Supply of energy to India has also been disrupted as nearly 45% of India's crude oil imports and around 90% of LPG imports pass through the Strait.

 

According to an Informist Poll of 13 economists, CPI inflation is expected to have risen to 3.4% in March from 3.21% in February, as per the latest available data. The government revised the CPI series in February, updating the base year to 2024 and increasing the number of items whose prices are tracked. 

 

Taking into account the growth-inflation dynamics, the Monetary Policy Committee on Wednesday left the policy repo rate unchanged at 5.25% in a unanimous decision, while also retaining the "neutral" policy stance. "The MPC noted that the intensity and the duration of the conflict in West Asia and the resultant damage to the energy and other infrastructure add risk to the inflation and growth outlooks," Malhotra said. 

 

The quarterly break-up of the central bank's latest inflation forecasts is as follows – 4% for Apr-Jun, and 4.4% for Jul-Sept, 5.2% for Oct-Dec, and 4.7% for Jan-Mar. It had previously forecast inflation in the second quarter of FY27 to average 4.4%.

 

Malhotra also said that the central bank projects core inflation in FY27 to average 4.4%, and said that the central bank will give projections for core inflation hereon. "Core inflation pressures remain muted, although supply chain dislocations and the risk of second-round effects render the future inflation trajectory uncertain," he said. Core inflation--which excludes food and fuel items, whose prices can be volatile--is seen at 3.5% in March, up from 3.4% in February, according to economists' estimates. 

 

According to Malhotra, the West Asia war could impact India in several ways, beginning with elevated crude oil prices, increasing imported inflation and widening the current account deficit. Second, disruptions in energy markets, fertilisers and other commodities may adversely impact industry, agriculture and services, reducing domestic output. Third, heightened uncertainty, increased risk aversion, and safe haven demand could impact domestic liquidity conditions, economic activity, consumption and investment. Fourth, weaker global growth prospects may dampen external demand and reduce remittance flows. Finally, adverse spillovers from global financial markets could tighten domestic financial conditions and raise the cost of borrowing. "Overall, the initial supply shock can potentially transform into a demand shock over the medium term if the restoration of supply chains is delayed," the governor said. 

 

So far, there has been a severe shortage of liquefied petroleum gas domestically, India's primary cooking fuel. The government has taken a slew of measures to ensure its supply remains smooth for domestic use, including fixing a stringent quota for LPG used for industrial purposes. Oil marketing companies have also, so far, absorbed the ballooning crude oil prices, and have not increased pump prices of widely used fuels like petrol and diesel.

 

The government has also reduced excise duty on petrol and diesel by INR 10 per litre on Mar. 27 to INR 3 per litre and zero, respectively, to provide relief to oil companies. Lauding these steps, the governor said that these steps should mitigate the adverse impact of the conflict. He, however, noted that although retail prices of petrol and diesel have remained unchanged so far, the pass-through of higher global energy prices has resulted in some price increases in a few other fuel items. Prices have increased for select fuels such as premium petrol and LPG, and diesel for industrial use.

 

Since the war broke out, Brent crude oil prices jumped 52% to $100 per barrel on Tuesday, and have eased slightly to around $93 on Wednesday after the US and Iran agreed to a two-week ceasefire to negotiate a definitive agreement for peace between the warring parties and in West Asia.

 

Besides the impact of the West Asia war, the likely emergence of El Nino conditions could pose a risk to the inflation trajectory, the central bank said. Food price outlook, however, remains comfortable in the near term with robust rabi production, adequate reservoir levels and comfortable buffer stocks of foodgrains. 

 

Concluding his statement, Malhotra said that global economic conditions and sentiment have soured after the outbreak of the West Asia conflict, and that has "adversely impacted" the growth-inflation outlook. "As reiterated before, we shall remain vigilant of the evolving situation and put in place policies that prioritise the best interests of the economy."  End

 

US$1 = INR 92.56

 

Reported by Priyasmita Dutta

Edited by Deepshikha Bhardwaj

 

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