Retail Inflation Expected to Average 5.1% in FY27: Report

New Delhi, May 13: India is projected to experience an average retail inflation rate of 5.1% in the fiscal year 2027. In April, the inflation rate slightly increased to 3.48%, up from 3.40% in March, according to a report released on Wednesday.

The report by Crisil Ratings noted that tensions in West Asia have persisted for 74 days, and the risks of rising retail inflation are emerging slowly, indicating that consumers remain somewhat insulated from high inflation.

Furthermore, the report suggests that the Reserve Bank of India may keep interest rates stable in its upcoming monetary policy.

It also highlighted that disruptions in the supply chain have led to an energy crisis, raising forecasts for oil prices. The average price of Brent crude is expected to range between $90 and $95 per barrel in FY27, which is approximately 32% higher than the previous year.

In April, inflation for electricity, gas, and fuel decreased due to base effects, while the government’s decision to maintain stable petrol and diesel prices helped keep transportation fuel inflation in check.

The anticipated impact of rising energy and other input costs on consumers has not yet fully materialized, resulting in core inflation remaining steady at 3.7% for the fourth consecutive month.

While inflation in restaurant and housing services, as well as household goods and appliances, rose as expected, the slower growth in precious metals inflation provided some relief.

The report warns that although the government has controlled retail fuel inflation by keeping petrol and diesel pump prices unchanged, pressures may build in the coming months.

It cautions that the sharp increase in costs for energy and other inputs by producers, along with rising trade and transportation costs, is likely to impact consumers, potentially leading to an increase in core inflation.

Additionally, potential El Niño conditions and ongoing heat waves may affect agricultural production due to below-normal monsoon rainfall, putting pressure on food inflation, which is gradually normalizing from its lowest levels.

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