Inflation to be key concern in FY26 due to rising raw material costs: Report

The report added that the Reserve Bank of India (RBI) is likely to allow for this depreciation, although intervention through forex reserves and policy adjustments could be used to prevent an excessive fall.

- 

Inflation remains the major risk going forward for the financial year 2026 due to the higher cost of raw materials, a DAM Capital report added.

The report added that inflation is a foremost concern for FY26, with a projected decline to 4.5 percent from the current level.

The major reason behind the persistent inflation is domestic pressure. The pass-through effect of rising raw material costs, particularly in agriculture, food, and metals, is expected to contribute to persistent inflation. As demand increases, businesses are likely to raise prices of raw materials, impacting consumers.

External factors are also a concern, particularly the ongoing tariff war and the depreciation of the Chinese Yuan.