India’s Retail and Food Inflation Rise Sharply; Onion Prices Jump 108%
India’s retail inflation rose to 5.54% in September, driven by soaring food prices, with onion inflation crossing 108% amid mounting price pressures.
According to government data released on Monday, the Consumer Price Index (CPI) showed that retail inflation in India rose to 5.54 per cent in September and 4.83 per cent in August, driven by a sharp increase in onion and other food prices, while remaining just within the Reserve Bank of India's (RBI) tolerance band.
Food inflation rose to 7.74 per cent in September from 5.97 per cent the previous month, according to the National Statistics Office (NSO).The top five items with high inflation were onion (108.09 per cent), silver jewellery (87.8 per cent), ginger (62.85 per cent), garlic (54.62 per cent) and lemon (36.41 per cent). On the other hand, inflation in potatoes, tomatoes, motor cars and jeeps, lady's fingers, and coconuts remained negative.
CPI rates for rural and urban areas are 6.08 per cent and 4.88 per cent, respectively, while the All India Consumer Price Index (CPI) with base year 2024 for September is 5.54 per cent. September inflation numbers are the highest since the new series, with base year 2024, took effect in January. The graph below, shared by the Ministry of Statistics & Programme Implementation, shows division-wise inflation for the Combined sector in September 2026 at the national level.
RBI Raised Its Benchmark
Last week, the RBI raised its benchmark repo rate by 25 basis points to 5.50 percent, its first increase in nearly four years, while signalling that rate cuts are out of the question in the near term and that further hikes may follow amid rising inflation, a weak rupee, and high crude oil prices. It also boosted its prediction for retail inflation for the current fiscal year to 5.2% from 5% before, citing rising price pressures across a range of commodities.
CPI inflation for 2026-27 is projected at 5.2 per cent, with Q2 at 4.9 per cent, Q3 at 6.0 per cent, and Q4 at 5.7 per cent. The government has mandated the central bank to keep inflation at 4 per cent, with a margin of 2 per cent on either side.
The top five states with high inflation were Tamil Nadu, Odisha, Madhya Pradesh, Telangana and Andhra Pradesh, NSO data showed.
Mizoram Had The Lowest Inflation
Dipti Deshpande, Senior Director and Principal Economist at CRISIL (Credit Rating Information Services of India Limited), spoke on the statistics and stated that food inflation is expected to stay stable in the upcoming months due to the impact of poor rainfall on agricultural productivity. She added that the scope of pricing pressure is expanding beyond food.
"Brent crude prices are expected to average USD 88-93 per barrel in fiscal 2027, 25-32 per cent higher on-year, keeping retail fuel prices elevated. At the same time, robust demand conditions are giving producers greater latitude to pass higher energy, transport and other input costs on to consumers, adding to underlying inflationary pressures," Deshpande was quoted by news agency PTI as saying.
Devendra Pant, Chief Economist, India Ratings and Research said food inflation recorded a 21-month high growth of 7.74 per cent yoy (August 2026: 5.97 per cent; July 2026: 5.52 per cent). Mass-consumption items like ginger, garlic, and lemon recorded high double-digit growth, while onion recorded triple-digit growth.
Rise in food inflation was due to a combination of seasonal increase in food inflation, adverse base effect (food inflation in September 2025 was (-)2.33 per cent) and El Nino," Pant said. Madhavi Arora, Chief Economist, Emkay Global Financial Services expects 3QFY27 inflation to average close to 6.1 per cent, implying the real policy rate would stay negative even with higher rates. "We reckon that beyond oil-related input costs, adverse weather is adding to food-price pressures, with El Niño potentially persisting into 2027. Cyclical production swings and greater crop diversion to biofuels add further supply-side risks," Arora said.
Every week, NSO gathers real-time pricing data from 1,465 villages across all States and UTs and 1,407 urban marketplaces, including internet markets. According to NSO, both rural and urban markets had a 100% response rate in September 2026.
(With Agency Inputs)
