Photo: Ravi Dwivedi / Wikimedia Commons, CC BY-SA 4.0
India’s retail inflation rose sharply to 5.54% in September from 4.83% in August, driven by a steep jump in food prices led by onions, according to provisional data released by the National Statistics Office (NSO) on Monday, October 12. The reading is the highest since the new consumer price index series, with 2024 as the base year, came into effect in January.
Inflation has now stayed above the Reserve Bank of India’s 4% target for four months in a row, though it remains just inside the upper tolerance limit of 6%. On back-series data, September’s figure is the highest since October 2024, when it stood at 6.21%.
Onion, garlic and silver lead the climb
Food inflation, measured by the Consumer Food Price Index, rose to 7.74% from 5.97% in August, its highest level since December 2024. Onion was the biggest driver: its year-on-year inflation more than doubled to 108.09% from 48.78% a month earlier. Garlic (54.62%), ginger (62.85%) and lemon (36.41%) also stayed high, while potato and tomato prices were still lower than a year ago, though the fall in tomato prices narrowed considerably.
Outside the kitchen, silver jewellery prices were up 87.80%, which kept the personal care and miscellaneous goods group at 13.75%, the highest of the 12 major divisions. Costs in restaurants and accommodation rose 9.36%, and transport inflation climbed to 5.01% from 4.6%, reflecting higher crude-linked costs.
- Rural inflation: 6.08% (August: 5.24%)
- Urban inflation: 4.88% (August: 4.31%)
- Highest among larger states: Tamil Nadu (6.81%), Odisha (6.70%), Madhya Pradesh (6.68%), Telangana (6.64%) and Andhra Pradesh (6.29%)
- Lowest: Mizoram
Pressure on the RBI
The data comes days after the RBI raised its benchmark repo rate by 25 basis points to 5.50%, its first increase in nearly four years, and signalled that rate cuts were off the table for now and further hikes could follow. The central bank also raised its inflation forecast for 2026-27 to 5.2% from 5%, projecting 6% for the October-December quarter.
What economists expect next
Economists said part of the rise reflects a low base, as food prices had fallen 2.33% in September 2025, along with seasonal factors and the El Nino weather pattern. Devendra Pant of India Ratings and Research expects headline inflation to be around 6% in October. Bank of Baroda’s Madan Sabnavis said the arrival of the new kharif crop will be key, as current price pressure largely reflects depleting stocks before the season.
CRISIL’s Dipti Deshpande said food inflation is likely to stay firm because weak rainfall is hurting farm output, and that price pressures are spreading beyond food as companies pass on higher energy and transport costs.
Price pressures are broadening outside food as well.
Dipti Deshpande, Principal Economist, CRISIL
