The government may hike fuel prices moderately in November as it looks at a brief window before key state Assembly elections planned early next year, Bloomberg reported on Thursday, citing Oxford Economics.
“We regard November as the last realistic window” for price increases at the pump, “before campaigning for early-2027 state elections intensifies,” Alexandra Hermann Prasad, lead economist at Oxford Economics, wrote in a note accessed by Bloomberg.
Goa, Uttarakhand, Punjab, Manipur, Uttar Pradesh, Himachal Pradesh and Gujarat will vote for a new state government next year.
The increase in fuel prices could be around half the magnitude of the cumulative 7.5% increases in May, the only period when pump prices rose in response to the war between the United States and Iran.
The hike in petrol and diesel prices could lift retail inflation to 6.2% in the October-December quarter and 6.5% in the first three months of 2027, Hermann Prasad said, adding that the readings would be above the Reserve Bank of India's (RBI) mandate of keeping it within the 2%-6% range.
The central bank, in its monetary policy review earlier this month, projected inflation at 6% in the October-December quarter. It further projected that inflation would moderate to 5.7% in the January-March period.
Oxford’s projections are higher and directionally different from what the central bank expects, according to the report as the institute's model suggests price pressures intensifying next year.
For FY27, Hermann Prasad forecast inflation at 5.4%, above the RBI’s 5.2% projection for the year.
The Oxford economist outlines a different inflation scenerio of the government does not announce a fuel price increase in November.
Hermann Prasad said if authorities do not announce a fuel price increase in November, her inflation projections should come down by 10-30 basis points in the coming quarters.
Nevertheless, “inflation would remain elevated,” and may require the RBI to hike repo rate in the December and February policy meetings by 25 basis points each, following October’s 25 bps increase. Inflation rose 5.54% in September 2026, the highest since late-2024 and up from 4.83% in August.
The central bank's recent currency-market measures should contain rupee volatility, “but elevated oil prices and persistent external financing pressures mean intervention alone is unlikely to deliver lasting currency stability,” she said, as quoted by Bloomberg.