India inflation rises above RBI target as food and fuel costs climb

India’s retail inflation climbed to 4.38% in June, pushing prices above the Reserve Bank of India’s 4% target for the first time in 17 months. The Ministry of Statistics and Programme Implementation put May inflation at 3.93%, marking the highest inflation print since India’s revised CPI series began.

Food and fuel drove the June increase. Consumer food price inflation was 5.32% year on year, with rural inflation at 4.74% and urban inflation at 3.92%. Petrol and diesel revisions added pressure, while weaker monsoon progress added to the strain on food prices.

The reading came after the RBI’s June 3 to 5 policy meeting, when Governor Sanjay Malhotra and the Monetary Policy Committee kept the repo rate unchanged at 5.25%, the standing deposit facility rate at 5.00%, and the marginal standing facility rate and bank rate at 5.50%. The committee held a neutral stance and warned that the global backdrop had worsened because of lingering conflict and fragile truce conditions, with elevated energy prices feeding into inflation projections. The June statement projected headline inflation could firm toward the upper tolerance band in the July-to-September quarter of 2026-27 before easing later. Aditi Nayar of HDFC Bank said the June jump was being driven by food and fuel inflation and that the outlook remained vulnerable to the West Asia conflict and uneven rains. Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said the data kept the inflation uptrend intact and that her team still expected a 50-basis-point rate hike in the second half of fiscal 2027. DBS Bank’s economist said lower oil prices and early July rainfall could still leave the RBI room to stay paused at its next meeting. A Reuters poll forecast 4.3% for the month, with estimates ranging from 3.65% to 5.50%.