India’s inflation outlook comes with a food threat

New Delhi: India's retail inflation outlook anticipates a rise from present levels, with food prices primarily behind the trend. However, analysts predict it will stay under the Reserve Bank of India's 6% limit, according to recent data. Retail inflation climbed to 4.45% in July, up from 4.38% in June, primarily due to higher food costs, particularly onion, ginger, and garlic, reported the Ministry of Statistics and Programme Implementation.

Food inflation, as per Consumer Food Price Index (CFPI), reached 5.52% in July, with rural food inflation at 5.79% and urban at 5.05%.

Vikram Chhabra, Senior Economist at 360 ONE Asset, believes inflation will rise over the coming months, largely due to food prices, but it should remain below the RBI's tolerance band of 6%. Debopam Chaudhuri, Chief Economist at Piramal Group, states that the July inflation increase was driven by supply-side factors, such as tomatoes, onions, transport costs, cooking fuel, and restaurant prices. However, these factors seem temporary rather than indicative of broader demand.

Aditi Nayar, Chief Economist at ICRA Ltd, expects CPI inflation to average 5% in FY2027, in line with the MPC's forecast. She notes that geopolitical tensions in West Asia and monsoon conditions pose risks to the upside. Rajeev Sharan, Head of Research at Brickwork Ratings, predicts around 4.5-4.7% headline inflation for Q2 FY27 (July-September 2026), with a mild uptick in September as base effects become less favorable.