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Informist, Monday, May 25, 2026

 

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--ICRA chief economist: See RBI focus on liquidity in H2, not June policy 
--ICRA chief economist: See MPC stance change Oct, rate hike Dec 
--ICRA chief economist: See retail fuel prices elevated even if Brent falls 
--CONTEXT: ICRA Chief Economist Nayar at India credit outlook press meet 
--ICRA chief economist: See FY27 CPI 5?ter retail fuel price hikes Mon
--ICRA chief economist: See INR-1.1-tln fiscal slippage by Centre FY27 
--ICRA chief economist: See rise in Centre mkt borrow below fiscal slippage

 

MUMBAI - ICRA Ltd. expects India's headline CPI inflation to average 5% in 2026-27 (Apr-Mar), taking into account the recent hikes in retail prices of petrol and diesel, its Chief Economist Aditi Nayar said Monday. Indian Oil Corp. Monday hiked retail fuel prices for the fourth time this month, taking the total price hike in petrol to INR 7.35 per litre and diesel to INR 7.53 per litre.

 

The estimate assumes a baseline crude oil price of $95 per barrel in FY27, indicating elevated prices through most of Apr-Sept, then falling to around $80 per barrel in Oct-Mar, Nayar said. Inflation could rise to 5.3% if crude averages $105 a barrel, Nayar said. In April, ICRA estimated CPI inflation at 4.5% in FY27, assuming crude oil prices average $85 per barrel.

 

"We have had RSP (retail selling price) hikes coming in a little later. But they won't go away very quickly. Just because crude oil prices come down doesn't mean that they will go away," Nayar said. "So, the impact on different macros could be different in different quarters. It will not be linearly in line with what happened with crude oil prices."

 

As per the new baseline, ICRA now sees India's GDP growth at 6.2% in the financial year ending March, down from 6.5?rlier. Due to the impact of the war in West Asia, the rating agency expects the Centre's fiscal slippage to be around INR 1.1 trillion, or 30 basis points in FY27, taking the Centre's fiscal deficit to 4.7% of GDP, Nayar said. The Union Budget had estimated the fiscal deficit at 4.3% of GDP, which would rise to 4.5% of GDP based on the new GDP series.

 

"We think the additional fertiliser subsidy this year will cost about 40,000 crore (INR 400 billion). Fuel subsidy around 50,000 crore (INR 500 billion). OMC (oil marketing company) dividend could go down by 15,000 crore (INR 150 billion). Excise duty collections will go down by (INR) 1.1 trillion. And direct taxes will also take a hit. The two positives we have are the additional customs duty on gold and silver and the economic stabilisation fund," Nayar said. However, despite the fiscal slippage, the Centre's increase in borrowing is likely to be smaller than the INR-1.1-trillion increase in the fiscal deficit, since the government likely carried forward more cash into FY27 than its revised estimate, Nayar said. 

 

On the monetary policy front, ICRA currently expects only one rate hike by the Reserve Bank of India's Monetary Policy Committee this financial year in December. ICRA sees the rate-setting panel changing its monetary policy stance in October, Nayar said. In June, ICRA expects a cautious commentary from the MPC.

 

Nayar does not expect the central bank to focus more on liquidity until Oct-Mar. ICRA does not expect any open market operations by the RBI to buy government bonds in the June quarter, Nayar said.  End

 

Reported by Cassandra Carvalho and J. Navya Sruthi

Edited by Saji George Titus

 

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