RBI Projects FY27 Inflation at 5.2 Per Cent Amid Rising Price Pressures

The Reserve Bank of India has projected consumer price inflation at 5.2 per cent for 2026-27, warning that price pressures are no longer as subdued as they were a year earlier amid higher food and energy costs and continuing supply-side risks.

The central bank expects inflation to average 4.9 per cent in the second quarter, 6 per cent in the third quarter and 5.7 per cent in the fourth quarter of FY27. Inflation has also been projected at 5.6 per cent for the first quarter of 2027-28.

Core inflation, meanwhile, is expected to remain at around 4.4 per cent during 2026-27.

RBI Governor Sanjay Malhotra said consumer price inflation increased to 4.8 per cent in August from 4.5 per cent in July, with the rise largely attributed to higher food and fuel prices.

He said core inflation had also increased, indicating that price pressures were beginning to broaden beyond food and fuel.

The RBI noted that food inflation had become more widespread, with significant increases recorded in items including sugar and onions. The rise in fuel inflation during August was largely attributed to unfavourable base effects.

According to the central bank, core inflation increased to 4.2 per cent in August, while core inflation excluding precious metals stood at 2.9 per cent.

The RBI also warned that supply-side pressures could remain elevated due to a deficient monsoon, continuing El Nino conditions and higher energy and commodity prices. The impact of these costs could continue to feed through to consumer prices, it said.

The share of items in the headline Consumer Price Index basket recording inflation above 4 per cent also increased steadily, reaching around 37 per cent in August.

Malhotra said the inflation outlook was less favourable than it had been last year, with headline CPI inflation expected to average nearly 5.8 per cent over the following three quarters.

He reiterated the projection of 4.4 per cent core inflation for the financial year and said the changing inflation environment made a recalibration of the policy rate necessary.