Indian Consumer Inflation Projected to Rise in FY27
A Crisil report projects that India's consumer inflation will likely rise to 4.3% in fiscal year 2027, up from an estimated 2.5% in FY26. While the forecast suggests future price volatility at the category level, it also indicates that overall discretionary spending power, particularly in urban areas, is expected to remain intact.
- The primary driver for the projected inflation increase is the "base effect," where food inflation is expected to normalize and rise in FY27 after being at unusually low levels during FY26. - This rise will be tempered by a newly revised Consumer Price Index (CPI) basket, which reduces the weighting of food items from 45.86% to 36.75% while increasing the weight of core inflation components to 57.89% from 47.3%. - Core inflation, which excludes volatile items like food and fuel, is expected to remain moderate in FY27 due to a high base set in FY26—a period marked by a sharp spike in gold and silver inflation. - The projected 4.3% inflation rate remains within the Reserve Bank of India's (RBI) mandated tolerance band of 2% to 6%, supporting expectations that the Monetary Policy Committee will likely maintain its pause on the policy repo rate. - The inflation figures are based on a new CPI series, with a revised base year of 2024 (updated from 2012), which was first released on February 12, 2026; this new basket includes modern consumer items like online streaming services for the first time. - While the RBI's Monetary Policy Committee focuses on CPI, the Wholesale Price Index (WPI) provides a different view, having hit a 10-month high of 1.81% in January 2026, also driven by rising food prices at the producer level. - This inflation outlook allows the RBI to focus on the transmission of the 125 basis points in rate cuts that were implemented during the 2025 calendar year.
