India Warns of Inflation Risks from Weak Monsoon and Rising Fuel Costs

India’s finance ministry has warned that retail inflation could accelerate in the coming months due to rising fuel prices and weaker-than-normal monsoon rains. The ministry said ongoing energy supply disruptions linked to the Middle East conflict, particularly uncertainties surrounding the Strait of Hormuz, remain a key risk to the country’s inflation outlook.

The report noted that higher fuel costs are likely to gradually feed into retail prices through increased transportation, energy, and food expenses. A significant rainfall deficit could further push up food inflation, impacting agricultural output and adding pressure on household budgets.

Despite these concerns, the ministry described the near-term economic outlook as one of “cautious resilience.” However, it emphasized the need for continued policy vigilance amid elevated global energy prices, a weakening rupee, rising production costs, and the possibility of a below-normal monsoon. India’s retail inflation stood at 3.48% in April, remaining below the central bank’s target level.