The proposed increase could be around half the magnitude of the cumulative 7.5% hike implemented in May, the only period when retail fuel prices rose in response to the war in the Middle East. Such an increase could push retail inflation to 6.2% in the October-December quarter and 6.5% in the first three months of 2027, both exceeding the Reserve Bank of India’s inflation target range of 2-6%, it said.
Oxford Economics’ projections are higher than the central bank’s estimates. In its monetary policy review earlier this month, the RBI projected inflation at 6% for the October-December quarter, easing to 5.7% in January-March. Oxford Economics expects price pressures to intensify next year, forecasting inflation at 5.4% for the financial year ending March, compared with the RBI’s projection of 5.2%.
If authorities do not announce a fuel price increase in November, Oxford Economics’ inflation projections could decline by 10-30 basis points in the coming quarters, the report added. Inflation would nevertheless remain elevated, potentially prompting the RBI to raise interest rates by 25 basis points each at its December and February policy meetings, following a quarter-point increase in October.
Inflation rose to 5.54% in September, its highest level since late 2024, from 4.83% in August. Hermann Prasad said the RBI’s recent measures in the currency market should help contain rupee volatility. However, elevated oil prices and persistent external financing pressures mean intervention alone is unlikely to ensure lasting currency stability.
She also said widening protests over allegations of electoral malpractice were unlikely to materially affect economic growth, as disruption had largely remained confined to Delhi and was too limited to have a significant impact.
Separately, aviation minister Ram Mohan Naidu said that discussions are underway with airlines to ensure that ticket prices are kept reasonable, which is a challenging task given the unstable jet fuel prices. "We need support from the Oil Marketing Companies (OMCs) also... airlines also have to come up with a different plan. So, (civil aviation) ministry is trying to facilitate the conversation between the stakeholders,” he said.