India's retail inflation quickens to 5.54% in September from 4.83% in August, hits near two-year high

India’s retail inflation quickened to 5.54% in September 2026 from 4.83% in August, driven by a sharp rise in food prices, particularly vegetables, according to government data released on Monday.

The latest figure marks a near-two-year high, the highest since October 2024, when inflation stood at 6.21%. However, India had revised the base year from 2012 to 2024 earlier this year and updated its consumption basket to reflect changing household spending patterns.

September’s reading is also the highest so far in 2026 under the revised series, following inflation of 4.83% in August and 4.45% in July.


Inflation has now remained above the Reserve Bank of India’s (RBI) medium-term target of 4% for four consecutive months, amid higher global crude oil prices, a weaker rupee and concerns over agricultural output, all of which have complicated the inflation outlook.

Retail inflation first breached the RBI’s 4% target in June, rising to 4.38% from 3.93% in May.

Rural CPI inflation stood at 6.08% in September, compared with 5.24% in August, while urban inflation came in at 4.88%, against 4.31% in the previous month.

A Reuters poll of 41 economists conducted between October 5 and 7 had projected retail inflation at 5.40% for September, up from the previously reported 4.82% in August, with estimates ranging between 4.90% and 5.90%.

The September reading comes just days after the RBI's Monetary Policy Committee (MPC) raised the benchmark repo rate by 25 basis points to 5.50% on October 7, marking its first rate hike in nearly four years, as inflation risks intensified.

Also Read: RBI Inflation FY2026-27: Malhotra & Co raises inflation forecast to 5.2% for FY27

The central bank also raised its inflation forecast for FY27 to 5.2% from 5.0% earlier, citing higher crude oil prices, elevated food costs and the impact of a weaker rupee on imported inflation.

Food inflation jumps to 7.74

Retail food inflation accelerated to 7.74% in September from 5.97% in August, as prices of key vegetables and other food items continued to exert pressure on the overall consumer price index.

Rural food inflation came in at 8.06%, while urban food inflation stood at 7.18%, against 6.17% and 5.64%, respectively, in August.

Among individual food items, onion inflation surged to 108.09% in September from 48.78% in August, making it the biggest price increase among the five high-inflation items identified in the government's release.

Garlic inflation rose to 54.62%, compared with 43.60% in the previous month, while ginger inflation moderated to 62.85% from 73.82%.

Lemon inflation accelerated to 36.41% in September from 15.15% in August, adding to the pressure from vegetables.

However, some food items continued to record price declines on a year-on-year basis.

Tomato inflation stood at -8.62%, compared with -31.09% in August, indicating that prices remained below year-earlier levels, although the pace of decline narrowed significantly.

Similarly, potato inflation came in at -11.50%, against -13.15% in the previous month.

The government's data showed that food and beverages inflation stood at 7.36% in September, with rural inflation at 7.71% and urban inflation at 6.75%.

Beyond food, inflation in restaurants and accommodation services stood at 9.36% in September, while transport services for goods recorded inflation of 14.73%.

Prices of precious metals and jewellery also remained an important component of inflation. Silver jewellery inflation stood at 87.80% in September, compared with 106.81% in August, remaining elevated despite moderating from the previous month.

The broader category of personal care, social protection and miscellaneous goods and services recorded inflation of 13.75%, while inflation in the other personal effects category stood at 38.69%.

Transport inflation stood at 5.01%, while clothing and footwear inflation came in at 3.93%. Housing, water, electricity, gas and other fuels recorded inflation of 2.74%.

Health inflation remained relatively subdued at 1.40%, while education services inflation stood at 3.94%.

The September data comes against the backdrop of a deficient southwest monsoon and El Niño conditions, which have raised concerns about agricultural output and the trajectory of food prices.

Higher global energy prices have added to these pressures. Brent crude oil has climbed above $100 a barrel amid the escalation of the West Asia conflict, raising concerns over fuel, transportation and production costs.

A weaker rupee, which has depreciated around 7% against the US dollar, has also increased the risk of imported inflation, particularly for an economy heavily dependent on crude oil imports.

Commenting on the latest CPI inflation data, Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, said, "he headline CPI inflation came in line with expectations. We continue to see the inflation trajectory trending higher above 6% through next few months as adverse base effects and food price shocks play out. RBI’s revised inflation estimates remain realistic."

RBI raises FY27 inflation forecast to 5.2%

The latest inflation reading comes after the RBI revised its inflation projections upwards at its October 7 monetary policy review, signalling growing concerns over the persistence and broadening of price pressures.

The central bank raised its FY27 CPI inflation forecast to 5.2% from 5.0% projected in August.

The RBI now expects inflation at 4.9% in the second quarter of FY27, followed by a rise to 6.0% in the December quarter and 5.7% in the March quarter. For the first quarter of FY28, inflation is projected at 5.6%, with risks assessed as evenly balanced.

The upward revision reflects concerns over elevated crude oil prices, the deficient monsoon, El Niño conditions and the possibility of supply-side pressures spreading across the broader economy.

Also Read: RBI raises repo rate to 5.5% in first hike under Governor Sanjay Malhotra, shifts stance to ‘calibrated tightening’

RBI Governor Sanjay Malhotra, while announcing the MPC decision, pointed to signs of inflation becoming more widespread across the consumer basket.

According to the central bank, the weighted share of items recording inflation above 4% increased to around 37% in August, suggesting that price pressures were no longer confined to a few categories.

The MPC also flagged evidence of elevated inflation expectations and signs of inflation becoming more generalised, although it observed that the pass-through of supply-side pressures into firms’ pricing behaviour remained limited.

The central bank said healthy foodgrain buffers and proactive government measures could help mitigate some of the impact of adverse weather conditions on food prices.

The October policy review also marked a shift in the RBI's monetary policy approach. After reducing the repo rate by a cumulative 125 basis points in 2025 and holding it at 5.25% for four consecutive reviews, the MPC raised the policy rate to 5.50% to contain inflationary pressures.