India’s inflation path ahead will depend on three key factors, according to the State Bank of India’s Economic Research Department (ERD). These are: how much higher energy prices pass through to retail, the progress of summer crop (Kharif) sowing, and any large negative inflation movement in individual items.
As of May 8, Kharif sowing area showed a reduction of 3 lakh hectares compared to last year. This could impact food supply and prices in coming months.
April CPI shows mixed trends
India’s Consumer Price Index (CPI) inflation rose slightly to 3.48% in April 2026, up from 3.40% in March 2026. While the overall rate is nearly flat, some categories saw sharp movements.
SBI’s Group Chief Economic Advisor Soumya Kanti Ghosh noted that inflation in restaurants and accommodation services increased significantly. This indicates the impact of an LPG shortage.
Food inflation climbed to 4.01% in April from 3.71% in March. Major contributors within food were chicken, milk, refined oil, and mustard oil. This aligns with the FAO Food Price Index, which showed a third consecutive monthly increase in April 2026.
Imported inflation remains under control despite West Asia war
The ERD economists observed that the war in West Asia has been a key point of interest for CPI inflation in recent months. Despite exchange rate fluctuations and supply chain disruptions, imported inflation (which has a 21.84% weight in CPI) actually decelerated slightly – from 6.49% in March to 6.34% in April 2026.
The weighted contribution of imported inflation stayed flat at 1.42% in April.
However, state-wise trends show divergence. Imported inflation in Telangana reached the 12% mark in April. In Rajasthan, Sikkim, and Andhra Pradesh, it is hovering around 8%. Some states have imported inflation lower than the overall national rate.
What softened inflation?
The softening of gold and silver prices led to an almost 100 basis points decline in inflation in the personal care division. This helped offset some of the food and energy-related pressures.
Outlook for FY27
Keeping all factors in view, the SBI ERD has retained its CPI forecast for the full financial year 2026-27 at 4.5%. The actual trajectory, however, will depend heavily on how energy prices pass through to consumers and how the Kharif sowing season progresses in the coming weeks.
