- India’s inflation outlook faces crude, El Niño risks.
- September saw retail inflation climb to 5.54 percent.
- Government, RBI measures aim to ease price pressures.
- Economy remains resilient despite global geopolitical headwinds.
India’s inflation outlook continues to face risks from elevated crude oil prices, disruptions to maritime freight routes and potential El Niño-related agricultural challenges, even as government interventions are expected to ease food prices, according to the Finance Ministry’s Monthly Economic Review for October 2026.
The report said managing inflation while sustaining economic growth would remain a key priority for policymakers in the second half of FY27, amid uncertainty over global energy prices and domestic agricultural production.
“Near-term inflation dynamics will be shaped by a combination of domestic food supply management, global energy volatility, and systemic liquidity conditions,” the report stated.
Govt Measures Expected To Ease Food Inflation
The Finance Ministry said government interventions are expected to ease price pressures on essential food items. These include releasing Kharif onions through the ‘Kanda Express’, imposing stock-holding limits on sugar dealers and reducing Basic Customs Duty (BCD) on crude edible oils.
However, the report warned that an intensifying El Niño event could threaten soil moisture during the upcoming Rabi sowing season. Festive demand could also add to inflationary pressures.
“Externally, elevated crude oil prices and maritime freight disruptions across the West Asian transit routes pose ongoing upside risks to input costs,” it said.
Retail Inflation Rises To 5.54% In September
India’s headline retail inflation, measured by the Consumer Price Index (CPI), rose by 71 basis points to 5.54 per cent in September 2026, compared with 4.83 per cent in August.
Food inflation climbed to 7.74 per cent, driven by rising prices of essential commodities, including onions, sugar, edible oils and rice. Core inflation also increased to 4.33 per cent in September from 4.16 per cent in August.
Retail inflation averaged 4.94 per cent during the second quarter of FY27, compared with 1.7 per cent in the corresponding quarter last year. The figure was broadly in line with the Reserve Bank of India’s (RBI) forecast of 4.9 per cent.
Despite the increase, the report noted that around 64 per cent of items in the CPI basket continued to record inflation below the RBI’s 4 per cent target.
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Wholesale Inflation Climbs To 11.39%
Wholesale inflation also recorded a sharp increase in September. The Wholesale Price Index (WPI) rose to 11.39 per cent from 9.92 per cent in August, driven largely by higher fuel and power prices.
Inflation in the fuel and power category accelerated to 25.85 per cent in September, compared with 22.93 per cent in August, reflecting intensified cost pressures in global energy markets.
RBI Measures To Help Contain Imported Inflation
Against this backdrop, the report said recent RBI measures to provide direct dollar liquidity to public-sector oil marketing companies (OMCs) and curb currency speculation could help contain excessive exchange rate volatility and mitigate imported inflation.
It added that the effectiveness of the recent interest rate hike in containing secondary inflationary effects would depend on the central bank’s active liquidity management.
Finance Ministry Sees Economic Growth Remaining Resilient
Despite persistent inflationary pressures, the Finance Ministry said India’s economic fundamentals remained resilient, supported by strong industrial activity, domestic demand, credit growth and investment.
However, geopolitical tensions, energy price volatility and global financial tightening continued to pose significant challenges to the economic outlook.
“Overall, while persistent geopolitical frictions, energy price volatility and global financial tightening remain key headwinds, the Indian economy may remain well-positioned to sustain its expansionary trajectory through the rest of FY27,” the report said.
The Ministry emphasised the need for continued vigilance to preserve macroeconomic stability amid global supply uncertainties.
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: abplive.com
