Page 22 - Policy Economic Report- June'26

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Inflation in India

Consumer price inflation remained within the Reserve Bank of India's medium-term target during May
2026, although price pressures showed signs of re-emerging following several months of moderation.
Rising global energy prices, higher food costs, and supply-side disruptions associated with geopolitical
tensions contributed to an increase in headline inflation, while underlying demand-side inflationary
pressures remained relatively contained. Despite the uptick, India's inflation performance continued to
compare favourably with many major economies, reflecting prudent monetary policy, stable domestic
demand, and effective supply-side interventions.

National Level Indices

Retail inflation, measured by the Consumer Price Index (CPI), increased to 3.93 % (provisional) in May
2026 from 3.48 % in April 2026. Rural inflation accelerated to 4.25 %, while Urban inflation rose to 3.53
%, indicating relatively stronger price pressures in rural areas. The increase in headline inflation was
primarily driven by food prices and the gradual transmission of higher international energy prices
following geopolitical developments in the Middle East. Nevertheless, headline inflation remained below
the RBI's medium-term target of 4 %, providing policymakers with continued flexibility while warranting
close monitoring of emerging inflationary risks.

Table 1: CPI & Consumer Food Price Inflation (CFPI) – Inflation Rates & Index Values (May & April 2026)

Source: PIB

Food inflation, measured by the Consumer Food Price Index (CFPI), also increased during the month, rising
to 4.78 % from 4.20 % in April. Rural food inflation stood at 4.85 %, marginally higher than urban food
inflation of 4.66 %. The increase largely reflected higher prices of vegetables, cereals, edible oils, and other
essential food items amid rising transportation costs, elevated fertiliser prices, and seasonal supply
constraints. While food inflation remained the principal contributor to the rise in headline inflation,
continued improvements in agricultural production and normal progress of the kharif season are expected
to moderate food price pressures over the medium term.

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