New Delhi: India’s retail inflation likely breached the Reserve Bank of India’s 4% target for the first time in about 18 months in June, as the full-month impact of petrol and diesel price hikes and firmer food prices pushed consumer inflation higher, according to a Mint poll of economists.
Cumulatively, the median estimate of 18 economists polled by Mint predicted consumer price index (CPI)-based inflation at 4.2% in June 2026 compared to 3.9% in May.
The estimated 30 basis points (bps) rise is close to the 36 bps impact from diesel price hikes predicted by the Reserve Bank of India (RBI) in the minutes of its June monetary policy meeting. One hundred bps equals 1%.
All but one of the economists polled predicted retail inflation to breach the RBI’s medium-term target of 4%, a first since January 2025. Although it would be the highest inflation print in about 18 months, data before January 2026 is not strictly comparable because it was based on the previous series.
If realised, it would also mark the first reading above the target under the revised CPI series, which uses 2024 as the base year and was introduced in February 2026 with January 2026 as the first data point.
The official data is scheduled to be released on Monday, 13 July.
Fuel impact
“The expected increase is less a reflection of broad-based inflationary pressures and more a consequence of a gradual firming in food, fuel and select services categories over recent months,” said Kunal Kundu, economist at Societe Generale.
Petrol and diesel prices were increased four times between 16 May and 1 June. While May captured only a partial impact, June would see a bigger hit from the price hikes, according to economists.
Dhiraj Nim, economist at ANZ Bank, said the pick-up in fuel inflation reflects these domestic fuel price hikes, which have remained in place despite the sharp correction in global crude prices.
Food risks
Food added to the pressure as well, with food inflation— which accounts for nearly 35% of the CPI basket— likely continuing its upward trend.
Economists caution a weaker monsoon could raise prices of weather-sensitive items such as vegetables and cereals through supply disruptions, but is unlikely to trigger a broad-based food inflation spike given ample food stocks and buffers.
“The uneven temporal as well as spatial progress of monsoon, forecasts of below-normal rainfall during July coupled with strong likelihood of El Niño occurrence, continue to pose upside risks to the food inflation trajectory,” said economists at Union Bank of India in a note dated 8 July.
So far, economists expect the pickup in inflation to remain largely confined to food and fuel. “Beyond food and fuel, upside risks to core inflation appear limited, amid softer gold and precious metal prices, and little scope for further pump price adjustments,” said Radhika Rao, economist at DBS Bank.
Even so, if June inflation comes in at the median estimate of 4.2%, average CPI inflation for the April-June quarter would be 3.9%, below the RBI’s latest projection of 4.2%.
Overall, the central bank expects inflation to average a significantly higher 5.1% in FY27 as the pass-through of global energy prices and the second-round impact of higher input costs could exert upside pressure.
The RBI’s monetary policy committee (MPC) also noted that there were upside risks to inflation due to global supply chain disruptions and uncertainty about the spatial and temporal distribution of the monsoon.
The next MPC meeting is scheduled from 3 August to 5 August. According to the Union Bank of India note, the MPC’s policy decisions are likely to be contingent upon the monsoon outcome and the persistence of core inflation rather than on transient movements in energy prices.
Economists widely expect the MPC to remain on pause in the August meeting despite risks of inflation breaching the 4%-mark.