New Delhi: The Reserve Bank of India (RBI) has raised its inflation forecast for the ongoing financial year, citing mounting pressure from global energy markets, supply-chain uncertainties and potential weather-related disruptions. The central bank now expects retail inflation to average 5.1 per cent in FY27, marking a notable increase from its earlier estimate of 4.6 per cent.
Announcing the Monetary Policy Committee’s latest decisions on Friday, RBI Governor Sanjay Malhotra said the changing global environment has prompted a reassessment of inflation risks. Escalating tensions in West Asia, coupled with rising crude oil prices and disruptions in international trade routes, have added fresh uncertainty to the economic outlook.
The revised projection reflects concerns that higher energy costs could gradually filter through to transportation, manufacturing and consumer goods prices. According to the RBI, the extended period of elevated commodity prices may also weigh on economic growth while simultaneously increasing inflationary pressures.
Despite the upward revision in its inflation outlook, the central bank opted to keep the benchmark repo rate unchanged at 5.25 per cent. The MPC also retained its neutral stance, indicating that policymakers prefer to closely monitor evolving domestic and global developments before considering any changes to interest rates.
Retail inflation has remained relatively subdued in recent months, staying below the RBI’s medium-term target level. Consumer Price Index (CPI) inflation was recorded at 3.4 per cent in March and 3.5 per cent in April, offering some relief amid global economic volatility.
However, RBI officials cautioned that the current moderation may not persist if international crude prices remain elevated for an extended period. The central bank also highlighted uncertainties linked to the upcoming monsoon season, noting that any adverse weather conditions could affect agricultural output and food prices.
Economists believe the RBI’s latest assessment reflects a more cautious approach as policymakers balance inflation management with the need to support growth. While domestic demand remains resilient, external shocks and climate-related risks are expected to remain key factors influencing the inflation trajectory over the coming months.
The RBI’s updated forecast signals that price stability could face renewed challenges, even as the Indian economy continues to navigate a complex and uncertain global landscape.
