EconomyInflation
Retail inflation jumps to 5.54% in September as onion prices more than double
Food inflation climbed to 7.74%, and prices rose faster in villages than in cities. Economists now expect the RBI to raise rates again in December.
Key points
- CPI inflation rose to 5.54% in September from 4.83% in August, the highest since the new series began.
- Food inflation jumped to 7.74%, with onion prices up 108% from a year ago.
- Several economists now expect another rate hike in December, after the RBI raised the repo rate to 5.50% last week.
India’s retail inflation rose to 5.54% in September, the highest since the new consumer price series began in January, as food prices climbed sharply. Provisional figures released by the Ministry of Statistics and Programme Implementation on Monday show inflation up from a revised 4.83% in August.
It was the eighth monthly rise in a row. Inflation stood at 2.74% in January.
Onions lead a food surge
Food inflation, measured by the Consumer Food Price Index, jumped to 7.74% from 5.97% in August. Onion prices were 108.09% higher than a year earlier, more than double August’s 48.78% rise. Garlic rose 54.62%, ginger 62.85% and lemons 36.41%.
Some vegetables got cheaper. Potato prices fell 11.50% and tomato prices 8.62% from a year ago.
Outside food, silver jewellery was up 87.80%, keeping the personal care, social protection and miscellaneous goods division at 13.75%. Restaurants and accommodation services rose 9.36% and transport 5.01%. Health rose the least, at 1.40%.
| Item | Value |
|---|---|
| Jan | 2.74% |
| Feb | 3.21% |
| Mar | 3.40% |
| Apr | 3.48% |
| May | 3.93% |
| Jun | 4.38% |
| Jul | 4.45% |
| Aug | 4.83% |
| Sep | 5.54% |
Villages feel it more
Prices rose faster in rural India. Rural inflation was 6.08% in September, against 4.88% in urban areas, widening the gap to 1.20 percentage points from 0.93 in August. Rural food inflation reached 8.06%, and urban food inflation 7.18%.
Among the larger states, Tamil Nadu had the highest inflation at 6.81%, followed by Odisha (6.70%), Madhya Pradesh (6.68%) and Telangana (6.64%). Tamil Nadu’s food inflation was 10.62%.
What it means for the RBI
The headline figure is still inside the Reserve Bank of India’s tolerance band of 2% to 6%, but well above its 4% target. Averaged over July to September, inflation works out to about 4.9%, in line with the projection the Monetary Policy Committee made when it raised the repo rate to 5.50% on 7 October. The committee expects inflation to rise to 6.0% in October to December and average 5.2% for 2026-27.
Economists expect more pressure ahead. Devendra Pant, chief economist at India Ratings and Research, said “an adverse base effect for food inflation in October 2025 could push food inflation in October 2026 to 9.1%”, and expects headline inflation of about 6.0% in October.
Madan Sabnavis, chief economist at Bank of Baroda, sees inflation peaking at 6% in the October to December quarter. “Therefore, our view still holds that December will warrant another rate hike,” he said. Bank of Baroda estimates core inflation, which leaves out food and fuel, at 4.3% in September.
Radhika Rao, senior economist at DBS Bank, said “we expect the RBI to keep the door open for another rate hike in December 2026.”
Crude oil above $100 a barrel and a weak rupee add to the risks, though the rupee recovered on Monday after the RBI’s weekend measures, closing at 95.78 a dollar.
What comes next
October’s inflation data is due on 12 November. The RBI’s next policy decision is due in December.
The documents
- Press Release of CPI for August 2026 (base 2024=100)Ministry of Statistics and Programme Implementation (NSO), 14 September 2026
- Monetary Policy Statement, 2026-27: Resolution of the MPC, October 5 to 7, 2026Reserve Bank of India, 7 October 2026