Inflation will be major concern in FY26 due to higher raw material costs: Report – Newz9

NEW DELHI: Inflation stays the major threat going ahead for the monetary yr 2026 due to the higher price of raw supplies, a DAM Capital report added.
The report added that inflation is a foremost concern for FY26, with a projected decline to 4.5 per cent from the present degree.
The major motive behind the persistent inflation is home stress. The cross-via impact of rising raw material pricesnotably in agriculture, meals, and metals, is predicted to contribute to persistent inflation. As demand will increase, companies are seemingly to increase costs of raw supplies, impacting customers.
External components are additionally a concern, notably the continued tariff warfare and the depreciation of the Chinese Yuan.
Given China’s vulnerability, the report predicts that the Yuan will seemingly see a steeper devaluation in contrast to the INR, placing further stress on India’s inflation ranges.
Furthermore, geopolitical tensions and insurance policies, resembling former US President Donald Trump’s “Make America Great Again” agenda, might spur demand for the US greenback, additional complicating India’s inflation outlook.
Despite these dangers, specialists spotlight that China’s deflationary pressures and the ensuing Yuan depreciation might present some reduction by making Chinese exports extra aggressive and probably easing inflationary pressures in India.
The Rupee efficiency in opposition to the US greenback is one other vital space to watch. The Indian Rupee is predicted to depreciate to a mean of 86.50-87.0 in opposition to the greenback by FY26.
This displays a constant weakening development, from a price of 84 to 85 in simply two months, and additional depreciation over the previous yr.
The US Federal Reserve’s higher rates of interest are attracting capital flows into the greenback, main to a widening hole between Indian and US rates of interest, as per the report.
Ongoing geopolitical tensions, the slowdown in China’s economic system, and a worldwide progress disparity favoring the US might consequence in a stronger greenback, additional pressuring the Rupee.
The rising commerce deficit, particularly with rising imports and a bigger items commerce deficit, is exacerbating the Current Account Deficit (CAD), anticipated to attain 1.4 per cent of GDP in FY26.
The report added that the Reserve Bank of India (RBI) is probably going to enable for this depreciation, though intervention via foreign exchange reserves and coverage changes might be used to forestall an extreme fall. Experts counsel that the truthful worth of the rupee, primarily based on the Real Effective Exchange Rate (REER) index, is round 90, signaling that the INR is at present overvalued by greater than 8 per cent.
Under the management of the brand new RBI governor, financial coverage is predicted to stability progress with inflationary pressures and the necessity to defend the Rupee, the report added.