New Delhi, June 14: A recent report indicates an 80% probability of the Al Niño phenomenon occurring between June and August, with a likelihood of it persisting until at least November at 90% or more. However, as of June 11, the water levels in the country’s reservoirs are above normal storage, and the supply of vegetables remains satisfactory.
According to a research report from Bank of Baroda, “In the coming days, it will become clear whether the supply situation can manage the impact of sudden changes in food and fuel prices on inflation.”
Economist Dipanwita Majumdar estimates that the Consumer Price Index (CPI) inflation rate for the fiscal year 2027 will range between 5.2% and 5.5%. This forecast is based on the potential effects of Al Niño and the expected average crude oil price of $90 to $100 per barrel.
In May 2026, the headline CPI inflation rate was 3.9%, lower than Bank of Baroda’s estimate of 4.1% but higher than April’s 3.5%.
The primary reason for this increase was the rise in food and fuel prices, with food inflation climbing to 4.8%.
Recent hikes in petrol and diesel prices have contributed to rising transportation-related inflation, while the inflation rates for restaurant and accommodation services have also increased.
Core inflation (excluding food and fuel) rose to 3.9%, indicating internal pressure on prices.
Bank of Baroda’s research highlights the risk of inflation due to higher fuel prices and weather-related uncertainties, particularly the impact of Al Niño on food prices.
The report states, “In terms of food inflation, the impact of higher fuel prices and potential increases in freight costs could further elevate inflation in the near future. Therefore, close monitoring of ‘second-round pass-through’ (the delayed effect of cost increases on prices) is essential, especially given the heightened weather-related risks this year.”
The report further notes, “We believe the risk of rising core inflation will increase as companies may pass some of the increased input costs onto consumers while demand remains stable. The risks associated with food inflation are also likely to rise in the coming days.”
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