For nearly 100 days now, the world has been bracing for higher inflation.
In India, price pressures have begun to emerge, but not fast enough to match public expectations, creating a widening gap between perception and reality.
Retail inflation in May stood at 3.93%, below the Reserve Bank of India’s (RBI) medium-term target of 4%, even as fuel prices were finally allowed to rise. Yet households increasingly feel that prices are climbing much faster.
The divergence stems from how inflation is measured versus how it is experienced. Headline inflation is a weighted average of 358 items, many of which continue to register deflation or inflation below 2%, helping keep the overall print subdued. Consumers, however, tend to notice the items they buy most frequently and the categories where prices are rising sharply, especially those linked to food and energy. Mint explores:
Feeling the pinch
Households’ perception of cost pressures—or felt inflation—is shaped by recent price movements rather than aggregate statistical averages.
Reflecting this, rose sharply in May 2026: by 56 basis points for the current inflation rate, the highest since September 2022, and by 80 basis points for the three-month-ahead period, the highest since November 2021.
To be sure, the headline inflation rate is also rising and now has inched closer to 4%, but the gap between official inflation and people’s perception remains sizeable. Against 3.93% headline inflation, the current expectation is nearly double at 7.76%. The three-month inflation expectation (for August 2026) touched 9.3%—significantly higher than the 5.1% inflation forecast by the Reserve Bank of India (RBI) for the July-September period.
Pushing the ceiling
The headline inflation rate represents what the average Indian spends on average consumption pattern in the country. It could be very different from people’s personal experience.
For example, an air flyer will feel the pinch of a 15% inflation rate in airfare, but its limited consumption (representing just 0.03% weight in the inflation basket) keeps its impact on inflation limited. Inflation is rising, and more sharply for several items, shaping people’s perceptions.
A Mint analysis of 358 items showed that 60 items recorded more than 6% inflation in May 2026, up from 40 items in January 2026. Many of these new items are ragi, jowar, edible oils, kerosene, firewood, and biogas, among others, reflecting rising food prices as well as .
While these are enough to induce inflation anxiety, over 165 items are still under 2% print, keeping overall inflation contained.
Cost pockets
While headline inflation remained contained, several crucial products saw notable price increases since January 2026, including cigarettes, refined oil, pulses, (LPG) and petrol. Products, which are linked to energy, were significantly hit due to the West Asia war.
The ripple effects are also showing up in other items. Since January 2026, the prices of petrol have increased by 3% and LPG and piped natural gas (PNG) by 4%. The cost of cooked snacks has also gone up significantly in five months. The tax hike on cigarettes is also showing up in inflation prints. Economists noted that apart from direct energy-linked price rises, second-round effects are also visible in restaurants and accommodation services.
Shared anxiety
The consumption baskets of a retired person, a salaried worker, and a farmer are very different. And so are their inflation perceptions. Moreover, people with lower or unsteady incomes are much more vulnerable to price changes, playing a role in shaping their perception as well.
The West Asia war has now caught up with the financial sector employees as well—the well-to-do and financially stable group. Their current and future inflation expectations have risen the fastest between March 2026 and May 2026, reflecting rising pressures across groups.
Barring retired persons (whose expectations were already on the higher side), every group reported significantly higher inflation expectations compared to two months ago.
Forecast vs reality
Beyond the gap between consumer perception and official readings, there is some difference in professional forecast and reality as well. It is acceptable for official readings to be different from the median forecasts by economists.
However, in five of the past six months, official readings have consistently undershot estimates by professional forecasts, suggesting a possible overestimation of price pressures.
For example, in May 2026, a showed a forecast of 4.1%, while a Reuters poll projected 4.0%, but the official reading came in lower than the critical 4.0%-mark.
Even the RBI’s forecast for the April-June quarter (4.2%) represents a tall order in June since the average for April-May has been limited to 3.7%. A back-of-the-envelope calculation suggests that unless June inflation hits at least 5.04%, the official reading will be lower than the central bank’s latest projections.