Business EconomyPosted at: Jul 15 2026 7:25PM

New Delhi, Jul 15 (UNI) India’s imported inflation climbed to 8.13% in June 2026, reflecting the growing impact of global price pressures and reinforcing the need for exchange rate stability to prevent imported costs from feeding into domestic inflation, according to SBI Research’s latest Ecowrap report.
The report said headline retail inflation (CPI) rose to 4.38% year-on-year in June from 3.93% in May, marking a 45-basis-point increase.
The rise was driven mainly by higher food prices and a sharp increase in transport and services inflation. Core inflation, which excludes food and fuel, also firmed up to 4.20%, indicating that inflationary pressures are becoming more broad-based across the economy.
SBI Research expects average CPI inflation to remain around 5% in FY27, with inflation likely to average 5.1% in the second quarter, 5.7% in the third quarter and 5.1% in the fourth quarter.
Given this outlook, it believes the Reserve Bank of India (RBI) is likely to maintain a prolonged pause in policy rates during the current financial year.
The report said the sharp rise in imported inflation has made exchange rate management increasingly critical, especially after the RBI unveiled measures in June to attract foreign currency inflows and strengthen external balances.
SBI Research estimates that Foreign Currency Non-Resident Bank [FCNR(B)] deposits mobilised under the RBI's latest scheme have already reached $8-9 billion at the system level. In addition, external commercial borrowings (ECBs) are estimated to contribute over $5 billion, while Overseas Foreign Currency Bonds (OFCBs) could add nearly $3 billion during the currency of the scheme.
According to the report, the 2026 mobilisation programme is structurally different from the one introduced in 2013 and is better designed to attract stable capital inflows. One of the biggest changes is that the RBI is bearing the entire hedging cost on fresh FCNR(B) deposits, significantly reducing costs for banks.
The regulator has also provided early clarity on leverage and standby letters of credit (SBLCs), unlike in 2013 when regulatory clarifications came much later, resulting in most inflows arriving toward the end of the scheme.
The report also highlighted that the current scheme offers a longer mobilisation window of around four months, giving banks more time to market the product and structure transactions.
Additionally, the emphasis on five-year deposits, instead of shorter tenures, is expected to reduce redemption pressures and improve long-term stability of capital flows.
Despite healthy foreign inflows, the rupee has remained largely range-bound. The report noted that India received $7.1 billion in foreign portfolio investment after the government's tax relief for debt investors, with nearly 87% of the inflows directed towards debt securities. RBI's foreign currency assets also increased during the period.
However, SBI Research said these inflows have not translated into a stronger rupee because the central bank has actively intervened in the foreign exchange market. Outstanding net forward positions increased to $106.6 billion in May 2026 from $95.3 billion in April, with a larger share concentrated in shorter maturities.
According to the report, the RBI has been actively using both spot and forward market operations to prevent speculative pressure, particularly from the offshore non-deliverable forward (NDF) market.
It observed that although India has received at least $15 billion in capital inflows over the past month, prudent intervention by the central bank has ensured that the rupee remained stable rather than appreciating sharply.
SBI Research said this approach should help shield the domestic currency from heightened global volatility. It also noted that stronger exporter hedging, the growing role of GIFT City as an international financial centre and greater regulatory clarity could further strengthen the rupee's stability in the coming months.
On the inflation front, transport, food and hospitality-related services were the biggest contributors to the rise in consumer prices during June. Transport inflation recorded the sharpest increase, jumping 256 basis points to 4.3%.
Inflation in restaurants and accommodation services rose by 117 basis points to 6.9%, while food and beverages inflation climbed to 5.1%. At the same time, inflation in personal care and miscellaneous services moderated significantly, providing some relief.
Inflation increased in both rural and urban India, although rural areas continued to witness higher price pressures. Rural inflation rose from 4.25% in May to 4.74% in June, while urban inflation increased from 3.53% to 3.92%. Transport inflation accelerated equally in both regions, while food inflation remained higher in rural India at 5.21%, compared with 4.79% in urban areas.
Looking ahead, SBI Research believes inflation will remain elevated but manageable during FY27. It said the combination of stable foreign currency inflows, prudent exchange rate management and calibrated RBI intervention should help limit imported inflationary pressures and maintain rupee stability despite an uncertain global economic environment, while allowing the RBI to keep interest rates unchanged for an extended period. UNI SAS AAB

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