New Delhi: India’s retail inflation likely surged to a 23-month high of 5.6% in September, accelerating from 4.8% the previous month, driven mainly by costlier food items, energy price spillovers and an unfavourable base effect, a Mint poll of 19 economists showed.
Should inflation come in as expected, this would be the first print above 5% since December 2025 and the fourth consecutive month when it will remain above the Reserve Bank of India’s (RBI’s) medium-term target of 4%. The persistent rise in retail inflation since hitting a historic low of 0.04% in October 2025 prompted the central bank to raise the repo rate by 25 basis points to 5.5% on Wednesday, while signalling further hikes.
Economists polled by Mint projected Consumer Price Index (CPI) inflation in a range of 5%-5.9%. The official data is scheduled to be released on 12 October.
“Vegetables, particularly onions, likely remained a major contributor, but elevated inflation across cereals, pulses, edible oils, sugar and protein-rich foods suggests that the pressure is no longer confined to a few volatile components,” said Societe Generale in a note.
Accounting for nearly 35% of the consumer price basket, food inflation has been continuously rising since January 2026, driving headline inflation upwards.
In September, however, not all of the increase in CPI will come from rising food prices. The base effect will also play a role: The CPI food index had declined 0.4% in the same month last year.
“Hence, a part of the expected rise in September inflation is mechanical rather than a fresh deterioration in underlying price pressures,” said Sujan Hajra, chief economist at Anand Rathi Group.
Pricier energy, raw materials
Beyond food, inflationary pressures are also visible through higher energy and raw material prices, which are expected to add to core inflation going ahead. “If elevated energy and input costs persist, firms are likely to pass through at least part of these costs to consumers, adding to core inflation pressures,” said Dhiraj Nim, an economist at ANZ Research.
Several energy-linked items such as liquefied petroleum gas (LPG), petrol, diesel, and firewood and chips, among others, are already recording 5.3-8.3% inflation. The recent flare-up in crude oil prices, which crossed the $100 per barrel mark again in early September, could push prices further if they are passed on to consumers. At the same time, core inflation, which excludes food and fuel prices, has been above 4.0% since June.
Against the backdrop of rising inflation and additional risks from the West Asia war, the RBI has increased its CPI forecast to 4.9% from 4.7% earlier for the July-September period. The 5.6% forecast for September suggests inflation during the quarter will be broadly in line with the central bank’s estimate.
Inflation is expected to keep getting worse from hereon. As per the RBI’s latest forecast, CPI inflation will average 6% in October-December – the central bank’s upper tolerance level – before easing slightly to 5.7% in January-March 2027.
The RBI is mandated to keep retail inflation in a 2%-6% band.
Continued pressures
“The near-term outlook on inflation points towards continued pressures from supply side on account of the deficient monsoon, ongoing El Niño conditions, and high energy and other commodity prices, the pass-through of which is still continuing,” the Monetary Policy Committee (MPC) said in its latest statement.
The MPC delivered a hawkish policy decision earlier this week, combining a rate hike with a change in stance to “calibrated tightening”. This means “rate cuts are off the table” in the near future.
Going ahead, economists expect at least two more hikes in the current tightening cycle to contain the second-round effect on inflation. Global factors like rising bond yields in developed economies and the pressure on India’s exchange rate will also be crucial. “Global financial conditions could thus increasingly dictate the RBI’s reaction function, alongside growth and inflation dynamics,” said Emkay in a report.