New Delhi’s latest Economic Survey 2026 paints a cautiously optimistic picture for India’s inflation trajectory. Retail inflation is projected to edge up slightly in fiscal year 2027 compared to FY26, yet it will remain firmly under control. This assessment comes amid a backdrop of softening prices in the current year, with expectations that inflation will hover within the Reserve Bank of India’s target band of 4 percent, plus or minus 2 percent.
The survey highlights a sharp moderation in inflation during FY26, driven primarily by easing food prices. RBI’s December 2025 projection pegs FY26 inflation at 2 percent, while the IMF anticipates 2.8 percent, attributing this to stable food costs. However, FY27 brings new challenges. Rising prices of key metals like copper, aluminum, and iron pose significant risks. Surging demand from infrastructure projects, the shift to clean energy, and data center expansions is outpacing limited supply, pushing input costs higher for manufacturing, construction, and capital goods.
Food inflation played a starring role in FY26’s decline, thanks to above-normal monsoon rains, robust reservoir levels, and bumper crop yields. But the survey warns that further drops are unlikely. As food prices normalize toward historical averages, inflation will naturally firm up. The base effect from last year’s low readings will also fade, contributing to higher annual figures even without fresh pressures.
Additional headwinds include spiking gold and silver prices, alongside rupee depreciation against the dollar, making imports costlier. Supply-side management and buffer stock policies will persist, but food inflation is expected to rise in FY27. Policymakers emphasize vigilance to navigate these statistical and structural pressures, ensuring macroeconomic stability as India pushes growth ambitions.