India’s inflation accelerates to 4.38% in June, exceeding forecasts
NEW DELHI, INDIA – JULY 9: People are seen crossing a waterlogged road after heavy rainfall at Gazipur Sabzi Mandi in New Delhi, India, on July 9, 2026. (Photo: Raj K Raj/Hindustan Times via Getty Images)
Hindustan Times | Hindustan Times | Getty Images
India’s consumer price inflation rose to 4.38% in June from 3.93% in May as the US-Iran war and weak monsoon increased food and fuel prices, adding to cost pressures.
According to a Reuters survey, the headline inflation figure was above economists’ expectations for a 4.30% increase.
Last month, India’s central bank left interest rates unchanged but said it expected inflation to rise and growth to slow in the fiscal year ending March 2027.
The Reserve Bank of India has forecast inflation to rise as high as 5.1% as consumers pay higher fuel prices and the country risks crop failures due to weather-related disruptions from El Niño this year. It pegged core inflation at 4.7% for the same period.
Following a brief ceasefire between Iran and the United States in June, clashes between the two sides resumed last week.
Global oil prices have risen as the United States and Iran compete for control of the Strait of Hormuz, one of the most important trade routes for global energy supplies.
India, the world’s fastest-growing major economy, is among the countries most vulnerable to supply disruptions caused by the Iran war. The South Asian country imports about 85% of its fuel needs and relies on the Strait of Hormuz for about 50% of its crude imports, 60% of its liquefied natural gas and almost all of its liquefied petroleum gas supplies.
The South Asian country also faces the danger of El Nino this year. India is facing the possibility of insufficient monsoon rains this year, despite heavy downpours that have caused floods in many parts of the country in the last two weeks.
“After a dry June, the monsoon advanced rapidly, reducing the rainfall deficit across India from 40% to 15% as of July 8,” Indian research and ratings firm Crisil, owned by S&P Global, said in a report on Friday. he said.
However, the India Meteorological Department (IMD) predicts that July rainfall will be 6% below the long-term average.
Crisil said “it can be as devastating to agriculture as a weak monsoon itself” as these fluctuations between rainfall scarcity and excess affect planting decisions, crop health and ultimately rural incomes.
India’s central bank has repeatedly emphasized its focus on core inflation. Although core inflation has not yet become a significant problem, prolonged high energy and food prices will increase core inflation through higher input, transportation and operational costs.
