RBI Policy: Complex oil math explains rise in FY27 inflation estimates

Kolkata: The Reserve Bank of India (RBI) has revised its assumption on crude oil price upward to $95 a barrel for the second half of 2026-27, from $85 per barrel earlier, explaining the likely rise in its FY27 inflation projections.

The central bank has projected the inflation at 5.2% for the fiscal, 20 basis points more than what it had said in the August policy meeting.

Also Read: RBI Inflation FY2026-27: Malhotra & Co raises inflation forecast to 5.2% for FY27

According to the Petroleum Planning and Analysis Cell (PPAC), the Indian basket of crude oil prices increased to average $90.2 per barrel in August and $116.1 per barrel in September from US $82.0 in July.

RBI Governor Sanjay Malhotra said that the near-term outlook on inflation points towards continued pressures from supply side and high volatility in international oil prices, besides the deficient Southwest monsoon and El Nino impacts.

Petroleum, crude and products imports increased by 21.3% year-on-year to $35 billion during July-August 2026 as against $28.8 billion in the same period last year.

Also Read: Credit growth may ease after rate hike but remain strong: RBI

"Price pressures are increasingly becoming visible across a range of commodities within the food component, apart from oil. In addition, early signs of inflation becoming generalised are also evident from the increase in core inflation and higher inflation across a larger segment of the CPI basket," he said.

India’s merchandise trade deficit widened to $58.7 billion during July-August 2026 from US$ 55.1 billion in the year-ago period, mainly driven by imports of electronic goods and crude oil.

"Going forward, moderation in global trade growth, elevated energy prices and persistent trade policy uncertainties pose upside risks to India’s current account deficit in 2026-27," the central bank said.