Retail Inflation in FY27 May Jump To 4.5% From 2.1% In FY26 Due To High Fuel Prices, Says ICICI Bank
· Free Press Journal
The United States-Israel-Iran war is set to impact the macroeconomic indicators of India. Retail inflation in financial year 2026–27 may jump to 4.5 percent due to rising fuel prices, according to an ICICI Bank report. This is a jump of 60 basis points from the previous forecast for the financial year.
The new inflation basket is also more sensitive to fuel prices than the previous inflation basket, the report argued. Earlier, ICICI Bank had forecast FY27 inflation at 3.9 percent.
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The report says that India may manage to keep retail inflation at 2.1 percent in the current financial year. The 2.1 percent mark is marginally higher than the lower limit of the RBI’s (Reserve Bank of India’s) mandate of 2–6 percent for the consumer price index.
US Fed Meeting 2026: Federal Reserve Keeps Interest Rates Unchanged At 3.5%-3.75% Amid Inflation And Global Uncertainty | VIDEOThe bank said that under the new inflation basket, the weight of food has dropped to 36.8, while the weight of petrol, diesel, and LPG has increased compared to the previous basket. This makes the new inflation basket more sensitive to fluctuations in fuel prices even as there remains price stability in other sectors.
The weight of food has decreased by 9.1 percent in the new series compared to the previous series.
The high volatility in fuel prices stems from the raging war in West Asia and the choking of the crucial Strait of Hormuz, which catered to 20 percent of the world’s energy trade.
Oil Prices Surge Past $100 As Iran Denies Direct Talks With US To End WarOil prices have jumped over 50 percent since the commencement of the war to reach their four-year high.
The bank said that every $10 per barrel increase in oil prices implies around 40–45 basis points of direct impact and 50–60 basis points of overall impact on CPI inflation.
Moreover, the impact of rising fuel prices would be more pronounced in wholesale inflation. For every $10 per barrel change in oil prices, there is a direct impact of approximately 70 basis points, given a weight of around 10.4 percent of mineral oils and crude.