Centre may hike fuel prices in November
What's the story
India is likely to increase retail fuel prices in November, a move that could push the country's inflation above the Reserve Bank of India (RBI)'s target range. This prediction comes from Alexandra Hermann Prasad, lead economist at Oxford Economics. She said November is "the last realistic window" for such price hikes before campaigning for early-2027 state elections picks up steam.
Inflation impact
Fuel price hikes to push inflation beyond RBI's target range
The potential fuel price hike in November could be around half of the 7.5% increase seen in May.
This was the only time retail pump prices increased due to the Middle East conflict, Prasad noted.
The move could push India's retail inflation to 6.2% in October-December and 6.5% in Q1 2027, surpassing RBI's target range of 2-6%.
Diverging forecasts
Oxford Economics's projections differ from RBI's estimates
Oxford Economics's inflation projections are higher than RBI's latest estimates and indicate a different path for price pressures.
In its monetary policy review earlier this month, the RBI projected inflation at 6% in October-December, easing to 5.7% in January-March.
However, Prasad expects inflationary pressures to build in the coming months due to possible retail fuel price hikes.
Rate hike
Prasad warns of potential rate hikes
Prasad also predicted that if a fuel price hike is not announced in November, Oxford Economics' inflation projections could fall by 10-30 basis points in the coming quarters.
She said even without a fuel price hike, "inflation would remain elevated," and the RBI may have to raise interest rates by 25 basis points each at its December and February policy meetings.
Inflation surge
Indian rupee outlook amid high oil prices and external pressures
India's retail inflation jumped to 5.54% in September, its highest since late 2024, up from August's 4.83%.
A further fuel price hike could worsen inflationary pressures and complicate the central bank's efforts to keep price growth within its target range.
The economist also assessed the outlook for the Indian rupee and said that RBI's recent currency-market measures should contain rupee volatility amid high oil prices and external financing pressures.