Page 16 - Policy Economic Report - April 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

accommodative macroeconomic policies, and robust performance in the manufacturing and services
sectors.

However, the external environment has become less favorable in recent months, particularly
following the escalation of conflict in the Middle East, which is expected to moderate growth to
around 6.6 per cent in FY27.

Inflation in India

Inflationary pressures remained subdued for much of FY26, with headline inflation averaging below
2 per cent during April 2025 to February 2026, largely driven by a decline in food prices. This benign
inflation environment provided space for monetary easing, with the Reserve Bank of India reducing
policy rates significantly during 2025. However, the monetary policy stance shifted from
accommodative to neutral in mid-2025, reflecting limited room for further easing and emerging
concerns around external vulnerabilities, including currency pressures and capital flow volatility. The
Reserve Bank of India kept the policy repo rate unchanged at 5.25 per cent in its first bi-monthly
Monetary Policy Statement for the financial year 2026–27 and the policy stance neutral.
Consequently, the Standing Deposit Facility (SDF) rate remains at 5 per cent and the Marginal
Standing Facility (MSF) rate and the bank rate at 5.5 per cent.

Going forward, inflation risks are expected to rise moderately, particularly in the context of elevated
global energy prices and ongoing geopolitical tensions. As highlighted in recent global assessments,
energy price shocks are increasingly becoming a key driver of inflation dynamics across economies.
For India, this implies a gradual shift from food-driven disinflation to cost-push inflation, driven by
fuel, transport, and input costs.

In a significant methodological reform in the measurement of retail inflation, the base year has been
revised from 2012 to 2024 (Base: 2024=100). The new CPI 2024 series is constructed using the latest
Household Consumption Expenditure Survey (HCES) 2023–24, along with inputs from the Periodic
Labour Force Survey (PLFS) and the Annual Survey of Unincorporated Sector Enterprises (ASUSE).
This revision ensures that the index better reflects current consumption patterns, emerging
expenditure trends, and structural changes in the economy.

• National Level Indices

Year-on-year inflation rate based on All India Consumer Price Index (CPI) with base year 2024 for
the month of March, 2026 over March, 2025 is 3.40%(Provisional). Corresponding inflation rates
for rural and urban are 3.63% and 3.11%, respectively.

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