Food Prices To Drive CPI Higher In FY27, But RBI May Not Hike Rates

The report stated that retail inflation is expected to rise due to food inflation normaliscing from the current low levels, mainly because of a low base effect.

While food prices are anticipated to remain broadly benign, supported by the assumption of a normal monsoon in 2026, the base effect will push food inflation higher than fiscal 2026.

Source : PTI

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Key points generated by AI, verified by newsroom

• India's consumer inflation to reach 4.3% by FY27.
• Food inflation rise due to normalizing low base.
• Non-food inflation to moderate overall price increases.

Consumer inflation in India is expected to rise to 4.3 per cent in the financial year 2027 (April 2026 to March 2027), compared with an estimated 2.5 per cent in the current financial year, according to a report by Crisil.

The report stated that retail inflation is expected to rise due to food inflation normaliscing from the current low levels, mainly because of a low base effect. It said "We expect retail inflation to rise to around 4.3 per cent in fiscal 2027 from an estimated 2.5 per cent in fiscal 2026".

While food prices are anticipated to remain broadly benign, supported by the assumption of a normal monsoon in 2026, the base effect will push food inflation higher than fiscal 2026.

However, the report noted that the reduced weight of food in the new Consumer Price Index (CPI) series will limit the extent of this increase. The weight of food in the revised CPI series has declined to 36.75 per cent from 45.86 per cent earlier, which implies that the base-effect-led increase in inflation will be smaller compared to the earlier series.

The report also highlighted that non-food inflation is expected to help restrain the overall rise in consumer inflation. The report further noted that core inflation is expected to cap the upside in consumer inflation. The weight of the core CPI index has increased to 57.89 per cent from 47.3 per cent, strengthening its influence on headline inflation.

In the first nine months of fiscal 2026, core inflation rose faster than the headline inflation rate, driven by a sharp spike in gold and silver inflation. However, due to this high base and expectations of benign global oil and commodity prices, core inflation is likely to remain moderate in fiscal 2027. Food inflation is expected to push up headline consumer inflation in fiscal 2027, but less than earlier expectations due to changes in the CPI basket. The lower weight of food in the revised series means that the rise in inflation will be more limited compared to the previous index.

The report also noted that food inflation volatility may decline under the revised CPI structure. According to Crisil, this inflation outlook would allow the Reserve Bank of India's Monetary Policy Committee to maintain its pause on the repo rate and focus on the transmission of the 125 basis points rate cut carried out in calendar year 2025. 

(Disclaimer: This report has been published as part of the auto-generated syndicate wire feed. Apart from the headline, no editing has been done in the copy by ABP Live.)

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