RBI Marginally Raises FY27 Retail Inflation Projection to 5.2%

Mumbai: The Reserve Bank of India on Wednesday marginally raised the forecast for retail inflation for the current fiscal to 5.2 per cent from its earlier estimate of 5 per cent and said price pressures are increasingly becoming visible across a range of commodities.

The near-term outlook on inflation points towards continued pressures from supply side on account of the deficient southwest monsoon, El Nino conditions and high volatility in international oil prices, Governor Sanjay Malhotra said while announcing the central bank’s October bi-monthly monetary policy.

“Price pressures are increasingly becoming visible across a range of commodities within the food component, apart from oil,” he said.

In addition, the early signs of inflation becoming generalised are also evident from the increase in core inflation and higher inflation across a larger segment of the consumer price index (CPI) basket, he said.

Considering all factors, he said CPI inflation for 2026-27 is projected to be 5.2 per cent with Q2 at 4.9 per cent; Q3 at 6.0 per cent; and Q4 at 5.7 per cent.

Inflation for Q1:2027-28 is projected at 5.6 per cent, with risks being evenly balanced.

Core inflation has been projected at 4.4 per cent for the current fiscal ending March 2027.

CPI-based retail inflation rose to 4.8 per cent in August 2026 from 4.5 per cent in July.

This was largely driven by higher inflation in food and fuel components.

“Food price increases have become more broad-based along with notable spikes in certain items such as sugar and onion,” Malhotra said, and added fuel inflation inched up in August, mostly due to unfavourable base effects.

Core inflation, excluding precious metals, increased to 2.9 per cent in August.

The Governor also said that the Monetary Policy Committee (MPC) observed that in light of available data, it is clear that inflation and its outlook are not benign as they were last year.

In this milieu, recalibrating the policy rate is imperative, he said as the MPC unanimously decided to hike the key interest rate (repo) by 25 basis points to 5.5 per cent.

The MPC also changed its stance to ‘calibrated tightening’ from ‘neutral’.

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