SBI Research Report Projects India's Retail Inflation to Briefly Exceed 6% in Oct-Nov Before Easing in Q4 FY27

NEW DELHI — India's retail inflation is projected to briefly cross 6 percent in the months of October and November before easing to approximately 5 percent in the fourth quarter of FY27, according to a recent SBI Research report.

The report anticipates that retail inflation will rise to 4.7 percent in August, following a reading of 4.45 percent in July. "We expect August inflation print at 4.7%, with inflation possibly just breaching the 6% in October and November before declining to ~5% in Q4 of FY27," the report stated.

Analysts point to improving food supply conditions as a key factor that could help contain inflationary pressures. The monsoon season has experienced a recovery following a weak start, marked by surplus rainfall in July and normal rainfall in August. This has narrowed the overall rainfall deficit to roughly 13 percent, a notable improvement from nearly 40 percent in June.

Additionally, the report notes that a positive Indian Ocean Dipole (IOD) could partly offset the impact of El Nino. Kharif sowing remains only 2 percent below the previous season despite below-normal rainfall recorded in some major foodgrain-producing states, which indicates better irrigation facilities among states. Historical trends also imply that fourth-quarter inflation could turn out lower than current forecasts.

Regarding monetary policy, Reserve Bank of India Governor Sanjay Malhotra stated that the central bank requires greater clarity on the inflation trajectory prior to recalibrating the policy rate. According to minutes from the latest Monetary Policy Committee meeting, inflation is showing signs of normalisation from earlier benign levels, leading the Governor to await further evidence before determining the future course of monetary policy.

At the same time, the SBI report raised concerns regarding central bank communication, arguing that recent policy actions may carry greater weight than forward guidance. Pointing to measures such as variable rate reverse repo operations (VRRR) and the FCNR(B) deposit mobilisation window, the report emphasized that markets must ensure a premium to pragmatic action over honest communication.

On the global front, the report highlighted that US Federal Reserve measures aimed at smoothing the long end of the US Treasury yield curve, which include increased government debt repurchases, could create broader implications for global markets. Yields have declined across longer maturities and the benchmark 10-year segment amid expectations of a shift in government debt supply between short- and long-term maturities.

"Macroeconomic indicators such as retail inflation trends and monetary policy adjustments directly influence business planning, capital allocation, and consumer spending across sectors. While a temporary rise in inflation during October and November could tighten market conditions, the projected easing towards the fourth quarter of FY27 offers a stable outlook for the broader economy. Businesses and entrepreneurs must closely monitor these central bank signals and liquidity measures to navigate funding and operational strategies effectively." — Dr. Shishir Gupta, Founder & CEO, StartupLanes