New Delhi – India's retail inflation data may not yet fully reflect the true impact of the escalating West Asia crisis, according to a recent warning from SBI Research. While the Consumer Price Index (CPI) inflation saw a slight increase to 3.48% in April 2026, remaining below the Reserve Bank of India's (RBI) 4% target, the financial institution's latest 'Ecowrap' report suggests significant inflationary pressures could emerge.
Contained Imported Inflation, For Now
The report highlights that, thus far, imported inflation has largely remained contained despite volatility in global commodity prices and currency markets. This stability is primarily attributed to retail fuel prices in India largely staying unchanged, preventing the full pass-through of higher global oil costs to consumers.
However, SBI Research cautions that this situation may not last. Future months could see a stronger emergence of inflationary pressures driven by elevated global energy prices, potential supply-chain disruptions, and rising imported commodity costs.
Food Prices on the Rise
While headline inflation has been moderate, food inflation continues its upward trajectory. In April, food inflation climbed to 4.01% from 3.71% in March. This increase was predominantly fueled by higher prices for essential items such as chicken, milk, and refined and mustard oils.
The report links this trend to global developments, noting that the FAO Food Price Index recorded its third consecutive monthly increase in April, with vegetable oil prices experiencing a particularly sharp global surge. Analysts will closely monitor El Niño developments and summer crop coverage, as both factors are expected to influence food inflation trends in the near future.
Other Inflationary Factors
Significant inflationary jumps were also observed in other sectors. Inflation for restaurants and accommodation services surged to 4.20% in April from 2.88% in March. SBI Research attributes this increase to LPG shortages and rising operational costs faced by hospitality and food-service businesses.
Additionally, the report noted an uptick in inflation for paan, tobacco, and intoxicants. Conversely, softer prices for gold and silver helped to moderate inflation within the personal care category.
Uneven Imported Inflation Across States
Imported inflation, which constitutes 21.84% of India’s CPI basket, saw a slight easing to 6.34% in April from 6.49% in March. However, state-level trends showcased significant disparities. Telangana registered imported inflation nearing 12%, while Rajasthan, Sikkim, and Andhra Pradesh reported figures close to 8%.
The report underscores that any sustained increase in crude oil prices or further escalation of geopolitical tensions could eventually translate into higher transportation, logistics, and manufacturing costs across the economy.
Rural vs. Urban Inflation
A notable trend highlighted in the report is that rural inflation continued to outpace urban inflation in April. Rural CPI inflation stood at 3.74%, compared to urban inflation of 3.16%. This disparity is largely due to more pronounced food-price pressures and existing supply-side constraints prevalent in rural areas.
Despite these potential risks, SBI Research has maintained its CPI inflation forecast for FY27 at 4.5%. Nevertheless, the report cautions that the actual trajectory of inflation will heavily depend on global energy prices, the performance of the monsoon, and the evolving geopolitical landscape in West Asia.