The uncertainties concerning the U.S.-Iran peace agreement could have an impact on the outlook through international trade, cost pressures, capital flows and commodity prices, a Reserve Bank of India (RBI) official said in the June edition of RBI Bulletin, which was released on Monday (June 22, 2026).
“The global economic landscape remains fragile despite some respite gained through the interim U.S.-Iran peace agreement,” they said in the State of the Economy chapter.
“Any breakdown of the agreement may reignite material risks in terms of inflationary expectations, disrupted critical energy infrastructure, delayed investment spending, food security concerns, adverse financial stability outlook and structurally lower growth,” they maintained.
According to them, the Indian economy entered this turbulence with much better fundamentals relative to many other countries to sustain the shock.
“India maintained a consistently high growth, anchored inflation expectations, sustained fiscal consolidation, manageable current account balance and foreign exchange buffers over the previous few years, which adds to its strength vis-à-vis similar other events in the past,” they emphasised.
An adverse south-west monsoon, if materialised, may weigh on the domestic growth-inflation outlook, they stated.
As an outcome of the West Asia conflict, the CPI headline inflation inched up sequentially to 3.9% (y-o-y) in May 2026 from 3.5% in the preceding month, driven by broad-based increases in all three categories – food & beverages, fuel and core components.
“Rise in inflation of food and beverages was across classes/sub-classes, barring pulses. CPI fuel inflation also increased significantly over the previous month on account of rise in retail prices of petrol, diesel and compressed natural gas (CNG), the officials said.
Among other factors, the month-on-month price build-up in CPI-Food and Beverages during May could also be attributed to a seasonal uptrend during summer, which was observed across all classes/sub-classes, except fruits and nuts, they wrote in the Bulletin.
“This broad-based pick-up in food prices appeared to have continued in June as suggested by the daily prices data available up to June 18,” they stated.
Within foodgrains, prices of rice and wheat, as well as major pulses, recorded an uptick. Among perishables, prices of major vegetables, viz., potato, onion and tomato, edged up further.
The month-on- month increase in the prices of edible oils remained broad-based.
Amidst the disruptions to global energy supply chains, the price of the Indian basket crude oil remained elevated despite easing in June from the peak observed in April, the officials stated.
A surge in international prices has partially been passed on to retail consumers through upward revisions in prices of petrol and diesel in four tranches in May, with cumulative increases of around ₹7.5 per litre and ₹7.6 per litre, respectively.
Domestic household LPG prices were increased by ₹29 per 14.2 kg cylinder in June, following a ₹60 hike in March 2026.
“Despite the hike, Indian households continue to pay amongst the lowest cooking gas prices in the world, as the government and oil marketing companies (OMCs) have largely prevented the high international prices from feeding into the expenditure budgets of households,” the RBI officials wrote in the chapter.
OMCs absorb under recoveries of about ₹700 per 14.2 kg cylinder as their cost of supply is more than ₹1600.
Wholesale Price Index (WPI) (base year 2022-23) inflation rose to 9.7% in May 2026 from 8.3% in the previous month, the highest in the new base series since April 2024.
Fuel and power group inflation rose further to 30.3% in May 2026. Manufactured products, with their higher weight, have contributed the most to the total inflation, they stated.
The industrial and farm input cost inflation too climbed up to 16.7% and 8.9% in May 2026, respectively, from deflationary territory in February, the RBI officials added.
Published – June 22, 2026 10:51 pm IST
