Food Inflation May Hit Discretionary Spending

India’s government warned that rising food inflation could put pressure on household spending on non-food discretionary items, as a larger share of disposable income may be spent on essentials.

The government’s monthly economic report said the outlook for food inflation and agricultural output remains uncertain. An intensifying El Niño, expected to peak later in 2026, along with global commodity prices and weather-related risks, could influence inflation.

Despite global economic uncertainty, India’s economic activity, inflation and external position remain relatively stable, the report said. Resilient domestic demand continues to support growth, although the pace of expansion has moderated.

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