“This is due to high vegetable prices, and high demand for investing in secure assets like gold and silver, amidst geopolitical tensions in West Asia,” Megha Arora, Director, India Ratings and Research, said.
Fuel inflation remained muted due to base effect. Fuel price pass through remained variable, with transport reflecting negative inflation, while costlier commercial liquified petroleum gas (LPG) reflecting in higher cost for restaurant services that increased to 4.2 per cent in April 2026, when compared to 2.88 per cent in March 2026 and 2.73 per cent in February 2026, she added.
From a regional perspective, the southern region recorded the highest inflation. Telangana led with 5.81 per cent, while all other states (Puducherry, Andhra Pradesh, Tamil Nadu, Karnataka, except Kerala) recorded at least 4 per cent, Arora said.
India Ratings expects the headline inflation is likely to further rise to 3.6 per cent in May 2026 in case of no passthrough of high energy prices to consumers as well as due to similar gold and silver prices – in this case it remains within RBI’s target of 4 per cent.
Geopolitical tensions and El Nino conditions continue to remain upside risks to inflation, it said.
After 74 days of the West Asia conflict, the upside risks to consumer price index (CPI)-based inflation seem to be materialising at a snail’s pace. That indicates the consumer remains largely protected so far, Dharmakirti Joshi, Chief Economist, Crisil Ltd , said.
To be sure, there was impact of the West Asia conflict in some categories such as vegetable oils. Crisil Intelligence’s Rice Roti Rate, or RRR, report estimates that the cost of both vegetarian and non-vegetarian thalis rose 2 per cent on-year in April as tomatoes, vegetable oil and liquefied petroleum gas became costlier, he said.
The West Asia conflict, together with heatwaves and the expectation of El Niño this year, will keep agricultural production and food inflation as key monitorable this fiscal year, Joshi said.
While the government has restrained the rise in retail fuel inflation so far, the persistent rise in global crude oil prices makes a higher pass-through to domestic cooking and transportation fuel prices an upside risk. Moreover, the sharp rise in the cost of energy and other inputs, as well as trade and transportation costs, is expected to be further passed on by producers to consumers, raising core inflation, he said.
A depreciating rupee also adds to the cost of imported inputs. Additionally, food inflation is expected to face pressure from disrupted agricultural production due to ongoing heatwaves and a likely below-normal monsoon, Joshi said.
We expect CPI inflation to average 5.1 per cent in fiscal 2027, higher than the 2.0 per cent in fiscal 2026 with risks tilted to the upside, he added.
For more details: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2260251®=3&lang=2
