February CPI inflation surged to 3.2% but it could rise even higher. Given how crude prices have spiked above $100/bbl on the back of the Hormuz Crisis, analysts predict inflation could surge higher from as early as March. The huge spike in crude led to Rs 60 per cylinder hike in domestic LPG cylinder prices,.
Economic observers pointed out that many sectors such as fuel and transportation — which together form a significant portion of India’s inflation basket — may see direct upward pressure, while other sectors such as precious metals may experience an indirect impact.
Fuel, transport inflation may rise amid Middle East tensions: CRISIL
Crisil noted that inflation in some categories, such as fuel and transport inflation, could face first-round effects of higher global prices against the backdrop of the ongoing Middle East conflict.
Fuel and transport inflation together account for about 14.2% of the CPI basket. The recent Rs 60 nationwide increase in domestic LPG cylinder prices is also expected to push up LPG inflation from March onwards. LPG inflation had stood at 1.6% in February.
Higher global fuel prices may also raise transportation costs, including petrol, diesel, compressed natural gas and airfares.
Crisil noted Precious metals inflation is expected to see a slow pick-up as it could see price pressures if the conflict intensifies, driving up safe-haven demand, say for gold.
Nuvama predicts 70 bps jump in FY27 inflation
Nuvama Institutional Equities expects the Inflation to remain within the tolerance band of the Reserve Bank of India but they also warned that headline inflation could rise due to tensions in the Middle East, which may push up oil prices or cause further supply disruptions.
Nuvama also noted that if a $10 per barrel increase in crude oil priceswill be fully passed on to consumers, it could raise CPI inflation by 50–70 basis points through both direct and indirect effects. The impact could be even higher if rising energy costs push up food prices.
Why is Nomura raising FY27 inflation forecast to 4.5%
Nomura has also raised its inflation forecast for FY27 (April 2026–March 2027) to 4.5% year-on-year (YoY) from its earlier estimate of 3.8%, saying it expects the impact of rising tensions in the Middle East to start showing in inflation data from March onwards.
Nomura said the revised estimate factors in both direct impacts of the Middle East conflict and rising energy prices, such as higher LPG prices, as well as indirect effects, including higher restaurant prices, transport fares, and rising input costs for businesses.
Meanwhile, brokerage firm Nuvama Institutional Equities said the rapidly changing global environment has made the earlier dovish outlook of the Reserve Bank of India less relevant. The brokerage expects the central bank to pause any policy changes for now.
“We expect the RBI to be on hold for now, while it monitors the duration of the shock and signs of spillover to core inflation and inflation expectations,” Nuvama said.
Crisil says CPI inflation may average 4.3% in FY27
Crisil expects CPI inflation to rise to 4.3% on average in FY27. While food prices are expected to remain benign, assuming a normal monsoon, food inflation is likely to continue normalising from this fiscal’s lows. Crisil expects crude prices to average $75-80 per barrel in fiscal 2027, compared with ~$70 average per barrel this fiscal.
Conclusion
Economists will now await the next bi-monthly monetary policy meeting of the Reserve Bank of India in April, which has an inflation target of 4% for CPI inflation, with a tolerance band of 2%–6%. Economists expect inflation to remain within the tolerance band set by the Reserve Bank of India, though they caution that persistent geopolitical tensions and higher crude prices could gradually lift headline inflation.
The Reserve Bank of India, in its July 2025 bulletin, noted that a 10% increase in global crude prices could raise headline inflation by around 20 basis points.