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Below the Quote on CPI by Aditi Nayar, Chief Economist, ICRA Ltd

As expected, the CPI inflation only inched up to 4.45% (ICRA's exp: 4.5%) in July 2026 from 4.38% in June 2026, amidst a gradually creep upwards in food & beverages and restaurants and accommodation services. 

While sowing is now only 1.8% below last year's level, the volume and dispersion of rainfall in the remainder of the monsoon season will still crucially influence output and prices.

We project the CPI inflation to harden to 4.7% in August 2026, and cross the 5% mark in September 2026, as the base effect turns unfavourable.  

Overall, CPI inflation is expected to average 5% in FY2027, in line with the MPC's forecast, with the prolonging of tensions in West Asia and monsoon outturn posing risks to the upside.

In our view, while immediate policy tightening is unlikely, elevated inflation projections for Q3 FY2027 through Q1 FY2028, suggest that the next move on rates is going to be a hike.  Evidence of a generalisation in inflationary pressures in the next few months could result in a rate hike in the December 2026 meeting.

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