Rising food and energy prices, a weak rupee and adverse base effects could push retail inflation higher, with Ind-Ra warning that persistent price pressures may prompt the RBI to raise policy rates by 50-75 basis points.
Rising food and crude oil prices, along with broad-based manufacturing and services inflation, could push retail inflation above the RBI’s 4.7% forecast for 2QFY27, says India Ratings and Research.
Strong investment, resilient consumption and robust manufacturing and services activity lift Q1 growth, while a better monsoon outlook supports optimism for 7% GDP growth in FY27.
Ind-Ra expects bank credit growth to rise to 15% in FY27, while higher funding costs, muted margins and rising credit costs could weigh on profitability.
PSU banks stand out for strong balance sheets, double-digit growth and valuations below intrinsic value, while expensive consumer and hotel stocks remain less attractive.
India Ratings and Research expects India’s GDP growth to moderate from 7.6% in FY26, with higher food and energy inflation, currency depreciation and fiscal pressures likely to weigh on the economy.
Food inflation accelerated to 5.5% in July, while onion and meat prices surged; Bank of Baroda expects CPI inflation at 5-5.2% in FY27.
RBI retains repo rate at 5.25% and keeps its neutral stance, while raising FY27 GDP growth forecast to 6.7% and lowering inflation projection to 5%.
Lower crude oil prices, resilient services exports, remittances and stronger capital inflows are expected to narrow India's current account deficit and help the country post a Balance of Payments surplus of $25-30 billion in FY27.
Retail inflation rose to 4.4% in June 2026, driven by higher food and transport costs, while Bank of Baroda warned that El Niño, deficient monsoon rains and sticky core inflation could keep price pressures elevated through FY27.
