India's inflation might move higher to 5% in FY27 led by food, energy prices; Core inflation to anchor around 4.5%: ICICI report
New Delhi, June 3
India's retail inflation is projected to climb to 5 per cent in the fiscal year 2027, driven primarily by surging food and energy prices, according to a report by ICICI Global Markets. The report also stated that core inflation is expected to remain anchored around 4.5 per cent during the same period, suggesting that the potential of El Nino might require some additional monitoring.
The projections follow a recent uptick in domestic price pressures. The report noted that India's retail inflation rose from an average of approximately 3.1 per cent during the January-March 2026 quarter to 3.48 per cent year-on-year (YoY) in April 2026. This increase was driven by a sharp rise in food inflation, which reached 4.2 per cent YoY in April compared to 3.2 per cent in the preceding quarter, while core inflation held relatively steady at 3.7 per cent.
Simultaneously, wholesale inflation surged to a more than three-year high of 8.3 per cent YoY in April, up significantly from an average of 2.6 per cent during the January-March period. This wholesale spike was led by fuel and manufactured products.
"Food inflation is seen rising in both retail and wholesale indices, with a number of segments such as meat, fish and other seafoods, fruits, edible oils and ready-made products witnessing uptick," the report said, while adding that "global energy prices firmly higher, global food and fertiliser prices are higher, which poses an upside risk to domestic food prices, especially in segments such as edible oils and pulses."
The report mentioned that even perishables such as veggies and fruits could see a near-term pick-up due to summer uptick and extreme heat conditions across the North and Central parts of the country.
On the policy front, enhanced Minimum Support Prices (MSP) facilitated robust procurement, which pushed wheat purchases to a four-year high and left public foodgrain stocks at over three times the buffer requirement by the end of March 2026. This comfortable surplus allowed the government to allocate 5.2 million tons of rice for ethanol blending and partially relax wheat export restrictions.
However, the report cautioned that, "while the current season reflects broad-based strength, the potential emergence of El Nino during the upcoming kharif season remains a critical downside risk requiring close monitoring."
With rainfall seen below normal across the major crop-producing regions in the Northwest, Central and Southern regions, the report highlighted that there is a significant risk to the food production outlook this year.
Approximately 40 per cent of total crop production in the country is concentrated in the Monsoon Core Zone, which is likely to see lower rainfall coverage this year. In case of deficient rains, rain-fed crops such as pulses, coarse cereals, oil seeds and spices should be impacted.
"If soil moisture is lower (deficient rainfall) and reservoir levels are not sufficient at that time, there could be some impact," the report noted.
— ANI
Reader Comments
It's concerning that El Nino might affect the kharif season, especially for pulses and oilseeds. We import a lot of edible oils already, so any domestic failure will hit prices hard. Let's hope the monsoon predictions are wrong 🤞
Interesting analysis from ICICI. Core inflation staying around 4.5% is relatively stable, but the wholesale inflation at 8.3% is alarming. That usually filters down to retail with a lag. Indian policymakers need to be proactive, not reactive, on food supply chains.
The MSP and buffer stock strategy is working for wheat, but why are edible oils and pulses still so expensive? We need to diversify production or import smartly. 5% inflation feels like a lowball estimate if global energy stays high 🔥
I'm surprised they're projecting only 5% for FY27. April 2026 already hit 3.48%, and if El Nino materialises, food prices could surge further. The report itself warns of upside risks. The RBI might have to raise rates sooner than expected.
It's good that the government is relaxing wheat export restrictions and using rice for ethanol, but we need long-term solutions. Climate change is making weather patterns unpredictable. The focus should be on irrigation and climate-resilient crops 🌾
A We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.