India's inflation in April rises for sixth straight month, but undershoots estimates

• The RBI cut India's Q1 GDP growth forecast to 6.8% from 6.9% and Q2 to 6.7% from 7.0%, citing the Iran war's economic impact
• The Indian rupee traded near all-time lows as higher energy costs are expected to significantly widen trade and current account deficits
• Crisil expects average inflation of 5.1% for FY2027, warning that rising input costs will likely be passed to consumers, raising core inflation

Summary

Key Development: India's consumer price inflation rose to 3.48% in April 2026, marking the sixth consecutive monthly increase from 3.40% in March. However, the figure undershot economist expectations of 3.80%, as the government implemented measures to shield consumers from rising global oil prices.

Main Concerns: The Reserve Bank of India (RBI) has warned that Middle East tensions, particularly the Iran war, pose significant risks to India's economic outlook. Former RBI Governor Duvvuri Subbarao cautioned that persistent inflation could harden expectations and transform a supply shock into a demand shock.

Economic Impact: India is highly vulnerable to Middle East disruptions, importing 85% of its oil and relying on the Strait of Hormuz for 50% of crude imports, 60% of LNG, and nearly all LPG supplies. The RBI has lowered GDP growth forecasts for Q1 (April-June) to 6.8% from 6.9% and Q2 (July-September) to 6.7% from 7.0%.

Market Pressure: The Indian rupee is trading near all-time lows as higher energy costs are expected to widen trade and current account deficits significantly. Prime Minister Narendra Modi has urged citizens to curb fuel use, reduce overseas travel, and pause gold purchases to conserve foreign exchange reserves.

Outlook: Crisil expects inflation to average around 5.1% for the financial year ending March 2027. While the government has avoided major fuel price hikes thus far, persistent global price increases could force producers to pass costs to consumers, raising core inflation concerns.