Our study of data till Aug’26, indicates that the process of inflation getting generalized has started. In Jan’26, 22 commodi ties explained 90% of CPI’s weighted contribution. In August this number of commodities increased to 51. Further, the top 25 commodities’ (ex gold/silver), contribution has declined from 83% in Jan’26 to 62% in Aug’26. 

Going forward, we believe CPI inflation may cross-6.5% mark before dropping to less than 6% in the early 2027. Time to build moats through a 25-bps hike in October and Dec MPC each, and then to pause and take stock with upcoming data! With West Asia conflict gaining both depth and breadth, crude oil price are expected to stay over $100 per barrel in the near future with higher volatility. Imported inflation remained elevated in August 2026, rising 7.75% YoY at the All-India lev el compared with headline inflation of 4.82%. While the pass through of rise in crude price remains partial until retail prices are revised, the fiscal implications and pass through proliferate at multiple levers, affecting pricing dynamics and allocation. The overall situation further gets nuanced when looking at steepening of borrowing costs globally where capital, and its mo bility can get scarce each passing day, with a price tag that disproportionately and severely impacts the operational and in vestment efficiency of all factors, as also trust in governments ability to push through the forward agenda. We have seen select sovereign ratings taking a knock as fiscal problems balloon and with higher interest servicing costs (as a percentage of sovereign GDP as also revenue generating capacity), there can be a vicious spiral in the offing that can put the best laid plans to test.  

The steepening of benchmark yield today towards 7.10% (we had given a call of rates moving 10-15 bps in short horizon in our last Ecowrap on Friday), there is a genuine threat of yields vaulting towards 7.25% First, and then inching towards ~7.50%, more a reaction to global phenomenon than any local issues but the damage can be done nonetheless. In addition, there is a Twin problem of Corporate borrowing slowdown from Capital Markets in most tenors and Exchange rate suscepti ble to movement of interest rate vagaries. We believe the situation should worsen as energy security and supply concerns mount and a forced era of Savings Dearth emerges wherein Capital, and its Allocation-Pricing quotient changes for a longer time, if not for good. That, without any borrowed intelligence, calls for counter cultural hard answers lest the incoming tempest snowballs in a hurricane.