The increase in prices of fuel, milk, and bread due to the ongoing Iran War can leave a dent on your pocket, and could push the retail inflation up by
up to 0.42% in the coming months. The central government has announced to increase the petrol and diesel prices by Rs 3 per litre, leading dairy brands, Amul and Mother Dairy, implemented fresh milk price hikes by up to Rs 2 per litre, and now major bread company Modern Bread has increased the prices of several bread variants by up to Rs 5 per packet in Mumbai and nearby areas. Centre has released the fresh revision on the fuel prices with Petrol prices have been hiked by Rs 0.86, and diesel prices are up by Rs 0.83. After the hike, the new petrol rates have gone up from Rs 97.77 per litre to Rs 98.64, while diesel rates have risen to Rs 91.58. According to the leading economists, the recent spike in these key commodities will lead to shoot up the inflation to up to 0.42% in the coming months. They also warned of wider second-round impacts through transportation, logistics and food costs. They said that fuel price alone can lift the retail inflation by 0.15-0.25 per cent, and milk price increase may lift inflation by another 0.26 per cent. Megha Arora, director at India Ratings and Research said, "The combined effect of petrol, diesel and milk price is likely to increase the CPI inflation by around 0.42 per cent. The actual impact is likely to be higher via the fuel user industry like transportation and others. However, the impact in the month of May 2026 could be around 0.20 per cent." Radhika Rao, senior economist and executive director at DBS Bank said given the weightage of petrol and diesel in the CPI basket, a 3-5 per cent increase likely adds 0.15-0.25 per cent to the headline inflation, besides second round impact. Further, SBI Research in its report said the immediate impact on CPI inflation is likely around 15-20 bps in May-June 2026."We revise our FY27 forecast to 4.7 per cent. There is no direct impact of this hike on the fiscal situation," the note added.
