India raised fuel prices on Friday morning, with petrol and diesel prices up around INR 3/litre, which takes petrol prices higher by INR3.14/l up to INR 97.77/l across several cities, while diesel prices climbed by INR 3.11/litre to as high as INR 90.67/l, according to the press release. This was a long-anticipated move in light of the sharp rally in global crude prices and rising burden of these costs on domestic oil marketing companies as well as the fiscal books. Higher pump prices are likely to aid in moderating demand and consequently the import burden. Given the weightage of petrol and diesel in the CPI basket, with a ~3-5% increase likely to add ~15-25bp to the headline. Retracing the steps back in 2022, authorities had raised the retail pump prices in two steps cumulatively by around 9-10%, subsequently acting on excise duties and windfall taxes, which overall nearly neutralised the fiscal burden.
In contrast to the benign April CPI report (see note), the wholesale price gauge rose by the fastest pace in three and half years in April, up 8.3% yoy from 3.9% month before. Two-third of the increase in the headline was due to a surge in the fuel & power (mineral oils, high speed diesel etc) at 24.7% yoy from 1.1% in March, followed by the heavily weighted manufactured price gauge which rose 4.6% yoy vs 3.4% month before. Chemicals, textiles, machinery and basic metals led the charge. Primary articles inflation rose to 9.2% (vs 6.4% in March). This points to rising cost-side pressures faced by businesses, through an increase in input costs, logistics etc. PMI price sub-components and business inflation expectation surveys have also captured similar input pressures.
More measures to support the INR are underway. The government announced an increase in import duty on gold and silver and tightened few administrative requirements yesterday, in a bid to contain inward purchases and dampen incremental demand for dollars. Gold was the third largest import item and second highest commodity in FY26 (at record $72bn; ~1.8% of GDP), behind crude petroleum ($174bn) and electronic goods ($116bn). Gold import tariffs were raised multiple times back during the taper tantrum to narrow the current account deficit and support the currency. Press reports suggest that a cut in the withholding tax (WHT) on foreigners’ bond holding is being considered. Besides capital gains tax (short & long-term), interest income typically attracts ~20% rate, after the concessional WHT facility was phased out in mid-2023. Debt category has witnessed FPI outflows worth $613mn in FY27 ytd, after $2.8bn inflows in FY26, under the general limit, VRR and FAR windows. In the near-term, currency movements will be subject to headlines and prone to weakness till equity outflows reverse. 
Topic
Explore more
E & S Macro StrategyGENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.