The food outlook has also turned uncertain on account of the subnormal south-west monsoon forecast and El Nino.
The central bank has revised the outlook on inflation measured by Consumer Price Index (CPI) upwards to 5.1%, as against the earlier projection of 4.6%.
“The monetary policy committee (MPC) was of the opinion that there are considerable risks to the baseline assessment of inflation and growth due to the uncertainty about the duration and intensity of the conflict, magnitude of its spillover effects and the pace of restoration of supply chains,” RBI Governor Sanjay Malhotra said even as the central bank kept the policy rates unchanged.
He said that the rising inflation could be a drag on the purchasing power
of households while the pass-through of higher energy prices becomes visible in several other inputs such as commercial LPG, industrial raw materials, chemicals, rubber and plastic products.
“The second-round impact of higher input costs could exert upside pressure on CPI inflation going forward,” RBI governor warned.
Price of petrol has been raised cumulatively by 7.4% since May while diesel price was up 8.4%.
“The increase implies a direct impact of about 36 basis points on headline inflation, which, along with second order effects, would get reflected in CPI inflation in the coming months,” Malhotra said.
Headline CPI inflation inched up to 3.4% in March and 3.5% in April 2026 primarily due to higher food inflation.