Global commodity prices are set to rise 23% in 2026, the World Bank said on Wednesday. Rising costs for food and metals mean India’s inflation fight got tougher. While prices might fall in 2027, food inflation could stay high. These pressures will keep India’s fiscal and current account deficits under strain.
Summary
With commodity prices on the rise alongside food inflation, India's twin deficits are likely to remain under pressure. Even if the cost of metals and other commodities come down next year, as forecasted by the Word Bank, controlling other price increases will be tough.
Global commodity prices are set to rise 23% in 2026, the World Bank said in its latest commodity forecasts on Wednesday. Disruptions in Black Sea grain shipments, the conflict in West Asia, and the El Niño effect have all contributed to the spike. Meanwhile, the growing demand for data centres and electric vehicles has pushed up prices of metals such as aluminium, copper and tin to record levels.
The silver lining is that commodity prices are expected to moderate in 2027. The World Bank expects commodity prices to decline 7% next year. Food prices, however, are projected to rise even in 2027. With the super El Niño threatening crops around the world, food inflation may be here to stay. These forecasts assume that conflicts in West Asia and Ukraine won't escalate further in the coming months. If these conflicts escalate further, commodity prices could spike up further.
The message for India is quite clear. Our twin deficits -- fiscal and current account -- are likely to remain under pressure. Commodity companies are likely to do well but other firms might face rising cost pressures. The battle against inflation just got tougher.