Oxford Economics expects India could raise petrol and diesel prices modestly in November, potentially pushing inflation above the Reserve Bank of India’s target range before early-2027 state elections.
Oxford Economics said India could lift fuel prices modestly in November, using what it described as the last practical opening before campaigning for early-2027 state elections gathers pace. Alexandra Hermann Prasad, the firm’s lead economist, said in a note on Thursday that five of the seven states due to vote next year, including Uttar Pradesh and Punjab, will go to the polls between March and May, narrowing the political room for any increase at the pump.
The economist said any rise would probably be about half the size of the cumulative 7.5% increase seen in May, when petrol and diesel prices were adjusted in response to tensions in the Middle East. On Oxford Economics’ modelling, that would be enough to push retail inflation to 6.2% in the October-December quarter and 6.5% in the January-March period, above the Reserve Bank of India’s 2% to 6% target band. The central bank’s own latest forecast is more restrained, with inflation projected at 6% in the final quarter of this year and 5.7% in the first three months of 2027.
Oxford Economics also forecast full-year inflation at 5.4% through March, above the Reserve Bank’s estimate of 5.2%. Prasad said that if officials do not move on fuel prices in November, Oxford’s inflation outlook would probably be trimmed by 10 to 30 basis points in the following quarters, although price pressures would still remain elevated. She added that the central bank may need to follow October’s quarter-point increase with further 25-basis-point rises in December and February if inflation stays sticky. India’s consumer inflation rate rose to 5.54% in September, the highest since late 2024 and up from 4.83% in August.
The note also argued that recent foreign-exchange steps from the Reserve Bank may help curb rupee volatility, but not enough on their own to secure lasting stability while oil prices stay high and external financing pressures persist. Prasad said protests over allegations of electoral malpractice were unlikely to meaningfully slow growth because the disruption had so far been concentrated in Delhi. Separate projections from the OECD suggest India’s growth should remain solid, but that higher energy costs and inflation will weigh on consumption and widen the current account deficit.
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