India Finance Ministry Warns of Inflation Amid Growth Projections

The Ministry of Finance of India warned in its October 2026 Monthly Economic Review that inflation remains under pressure due to elevated crude oil prices, maritime freight disruptions in West Asian transit routes, and potential agricultural disruptions caused by El Niño. Headline retail inflation rose to 5.54 percent in September 2026 from 4.83 percent in August, while food inflation climbed to 7.74 percent and wholesale inflation surged to 11.39 percent.

To combat these pressures, the government implemented supply-side interventions, including stock-holding limits on sugar, reduced customs duties on edible oils, and the Kanda Express for onion distribution. Simultaneously, the Reserve Bank of India's Monetary Policy Committee raised the policy repo rate by 25 basis points to 5.5 percent in October, shifting its stance to calibrated tightening. The central bank also provided dollar liquidity to oil marketing companies to mitigate imported inflation and currency speculation.

Despite these headwinds, the ministry projected GDP growth of 7.35 percent for the second quarter of FY27. This resilience is supported by domestic credit growth of 21.6 percent and foreign exchange reserves of 721 billion USD as of October 16, 2026, which provides 10.3 months of import cover.