Fuel and Food Inflation Fears in India

India faces rising inflation risks due to an 8-9% hike in retail fuel prices and a forecast for a below-normal monsoon at 90% of average. TS Lombard expects the RBI to hike interest rates by year-end as CPI is likely to overshoot the 6% upper target.

Key Takeaways

• 1.Retail fuel prices in India have been hiked by 8-9% in May after a two-year freeze, driving up transportation costs and inflation.
• 2.The India Meteorological Department forecasts a below-normal monsoon (90% of average), heightening risks of supply-side food inflation.
• 3.The RBI is expected to raise its inflation projections and potentially hike interest rates by the end of 2026 as CPI is modeled to overshoot 6%.

Table of Contents

• India - Chart Story
• Fuel and Food Inflation Fears
• Retail Fuel Price Hikes
• Inflation Modeling and RBI Outlook
• Currency and Portfolio Outflows
• Crude Oil Supply Basket
• Trade Deficit and Export Earnings
• REER and Monetary Policy
• Manufacturing PMI and Monsoon Forecast

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