Industry Odisha Bureau, Oct 16: Oxford Economics sees November as a possible window for a fuel price hike in India. Such a move could lift inflation above the RBI target band. Early-2027 state elections shape the timing, it says.
Inflation Faces Another Test
India’s inflation outlook could face fresh pressure in the coming months. Retail inflation already rose to 5.54% in September, from 4.83% in August. That was the highest reading since late 2024.
A possible fuel price hike in November could add to that strain. Oxford Economics raised this possibility in a note released on Thursday. Its lead economist, Alexandra Hermann Prasad, expects any increase to be moderate.
Why November Matters
Hermann Prasad called November the last realistic window for raising pump prices. Her reasoning rests on the state election calendar. Seven states are due to hold elections next year. Five of them, including Uttar Pradesh and Punjab, vote between March and May. Campaigning is expected to intensify ahead of those polls.
Retail fuel prices last rose in May, by a cumulative 7.5%. That was the only increase linked to the Middle East war. Oxford Economics expects a November move of roughly half that size. No official decision on fuel prices has been announced.
Inflation Forecasts Diverge
A fuel hike could push inflation above the RBI’s 6% upper limit. The RBI targets 4% inflation, with a tolerance band of 2–6%.
Oxford Economics projects inflation at 6.2% for October–December 2026. It sees inflation rising to 6.5% in January–March 2027. The RBI’s own projections are lower. The central bank expects 6.0% for October–December, easing to 5.7% by March. For the full FY2026–27, Oxford Economics forecasts 5.4%, against the RBI’s 5.2%.
How Fuel Feeds Inflation
Fuel costs ripple through the wider economy. They raise household transport bills and business distribution expenses. Goods moving through long supply chains can also become costlier.
Interest Rates Under Pressure
The RBI raised its policy rate by 25 basis points in October. Hermann Prasad said further increases may be needed. She suggested 25-basis-point hikes at both the December and February meetings. These are projections, not decisions. The Monetary Policy Committee sets rates independently.
The Alternative Scenario
Oxford Economics also considered a scenario without a November fuel hike. Its inflation forecasts could then fall by 10–30 basis points. Even so, inflation would remain elevated, Hermann Prasad said.
Oil Prices and the Rupee
The rupee faces its own pressures. Hermann Prasad said recent RBI currency measures should help contain volatility. However, she cautioned that intervention alone may not ensure lasting stability. Elevated oil prices and persistent external financing pressures remain key concerns.
Policy Choices Under Scrutiny
The fuel price decision remains uncertain. If a hike comes in November, inflation could move above the RBI’s tolerance band. If it does not, price pressures may still linger. Either way, the RBI faces careful choices in the months ahead.
