India: Subsidies delay pass-through from Oil – ING

According to ING’s Deepali Bhargava, India has temporarily contained consumer inflation from higher Oil prices by capping retail fuel pass-through, leaving CPI impacts modest so far. However, wholesale price pressures are surging on fuel and metals, with rising food costs and global rice prices posing upside risks to India’s 2026 inflation forecast as WPI-CPI pass-through builds.

WPI surge threatens benign CPI outlook

"India managed to shield consumers from the full impact of higher global oil prices by limiting the pass-through to retail fuel prices till mid-May. Gasoline and diesel prices have been raised 4 times in the last 10 days. Even so, gasoline prices have risen by only about 8%, making India one of the least affected economies in the region in terms of direct pump-price increases. As a result, the immediate impact on consumer price inflation has been relatively modest, estimated at around 20 basis points."

"Yet underlying cost pressures are building rapidly at the wholesale level. WPI inflation more than doubled to 8.3% year-on-year in April 2026, up from 3.9% in March. Largely, this has been driven by a sharp 25% increase in fuel and metal prices. These pressures are beginning to broaden, with food inflation also showing signs of firming. Global rice prices have started to rise, while edible oil inflation remains elevated. The key risk ahead is that if elevated oil prices persist, upstream cost pressures will increasingly be passed through to consumers. That would push CPI higher and create upside risk to our still‑modest 2026 inflation forecast of 4.4%."

"Elevated wholesale price pressures, potential second-round effects on consumer inflation, and emerging energy supply constraints—particularly in coal—could complicate the outlook if global oil prices remain high for an extended period."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)