El Niño, costlier crude may keep inflation elevated: Piramal Finance economist

India's retail inflation in September was largely in line with the Reserve Bank of India's (RBI) projections, but adverse weather conditions and elevated global crude oil prices could prolong pressure on food and fuel prices, Debopam Chaudhuri, Chief Economist at Piramal Finance, said on Tuesday.In an exclusive interview with ANI, Chaudhuri said markets had already anticipated a gradual increase in Consumer Price Index (CPI) inflation, with the latest figures showing no significant or unexpected surge in prices.“Looking at inflation in the September quarter, it is exactly at the rate the RBI had forecast. There is no indication of runaway inflation in the data, and I believe the central bank will continue with its existing approach,” he said.However, Chaudhuri cautioned that unfavourable weather patterns and persistently high international crude oil prices could create additional inflationary pressures in the months ahead.El Niño raises concerns over food pricesDiscussing the potential impact of El Niño, Chaudhuri said the weather phenomenon could affect both kharif crop output and the sowing of rabi crops, potentially keeping food inflation elevated for longer than anticipated.“The El Niño we are experiencing this year is turning out to be one of the most severe since the 1980s,” he said.He also pointed to high global crude oil prices as a concern for the Indian economy, noting that they were increasing the country's import bill and adding to imported inflation.On currency movements, Chaudhuri said intervention by the central bank and a possible weakening of the US dollar could offer some short-term relief. However, he warned that the inflationary impact of expensive crude oil could take longer to subside.He added that businesses were likely to gradually transfer higher input costs to consumers, potentially sustaining inflationary pressures across the eLeconomy.Rural consumption may face greater pressureChaudhuri said rising inflation in rural areas could weigh on consumer spending, while urban consumption was likely to expand at a faster pace.He attributed the expected divergence to the differing effects of inflation on rural and urban households.“I am expecting to see urban spending to be much faster than rural spending because of this dichotomy in the way inflation is hitting these two segments,” he said.RBI rate outlook and FY27 growth forecastOn monetary policy, Chaudhuri expects the RBI to maintain its existing interest rates at its December meeting, given that inflation remains broadly consistent with the central bank's projections.“I don't expect another rate hike in December, primarily because the inflation that we have seen so far is pretty much in sync with RBI expectations,” he said.However, he expects the RBI to consider a gradual tightening of monetary policy in the months that follow, with potential increases of 25 basis points each in February and April.Despite the risks from adverse weather and higher import costs, Chaudhuri remained positive about India's growth prospects. He projected the economy to expand by approximately 6.9 per cent in the financial year 2026-27 (FY27).“Overall, I think the growth rate in FY27 should be close to around 6.9 per cent,” he said.You use AI every day. Now get your AI Quotient. Take the AIQ test.