New Delhi: The Economic Survey 2026 released by the government on Thursday indicates that retail inflation in India is expected to see a slight increase in the financial year 2027 compared to FY26, but it will remain under control.
The survey highlights a sharp moderation in inflation during the current financial year, with the Reserve Bank of India (RBI) projecting inflation to stay around its target of 4 percent (+/- 2 percent). According to the survey, the RBI estimated inflation at 2 percent for FY26 in December 2025, while the International Monetary Fund (IMF) forecasted it at 2.8 percent, mainly due to softening food prices.
Several factors contributing to a potential rise in inflation in FY27 have been outlined in the survey. It notes that prices of key metals such as copper, aluminium, and iron are expected to increase. The growing demand driven by infrastructure development, shift towards clean energy, and investments in data centres, combined with limited supply, is likely to push metal prices higher. This, in turn, could raise input costs for manufacturing, construction, and capital goods.
The survey further explains that the unusually low inflation base in FY26 was largely due to a significant fall in food prices. This suppressed the overall inflation figures substantially. As these favourable base effects fade in FY27, inflation is expected to rise naturally even without new price pressures. The survey emphasises that this statistical effect alone will significantly contribute to higher inflation numbers in the upcoming year.
In FY26, food inflation played a crucial role in reducing overall inflation, supported by above-average monsoon rainfall, improved reservoir levels, and good yields of major crops. However, the survey cautions that the scope for further decline in food prices is limited. As food prices revert to historical average levels, inflation is likely to strengthen. Although supply-side management and buffer stock policies will continue, food inflation in FY27 is expected to be higher than in FY26.
Additionally, the survey points out that rising prices of gold and silver, along with a depreciation of the rupee against the US dollar, have made imports costlier and will contribute to a higher inflation rate in FY27 compared to FY26.
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