Food inflation accelerates to 8.94 per cent as onion prices more than double; economists see a further 25-basis-point repo rate increase in December as inflationary pressures broaden
India’s retail inflation breached the Reserve Bank of India’s (RBI) upper tolerance limit in October, with rising food prices pushing the Consumer Price Index (CPI)-based inflation rate to 6.09 per cent. The reading compares with 5.54 per cent in September, taking inflation above the central bank’s prescribed 2-6 per cent tolerance band.
According to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on 12 November, retail inflation has increased for nine consecutive months, climbing from 2.74 per cent in January 2026 to 6.09 per cent in October. The October figures are provisional and are based on the revised CPI series with 2024 as the base year.
“India’s headline inflation tested the upper end of the RBI’s tolerance band in Oct to a two-year high, with a sharp food-driven upmove accompanied by signs of broadening out of price pressures on a sequential basis,” said Radhika Rao, Senior Economist and Executive Director, DBS Bank.
Food prices remained the biggest source of pressure on household budgets. Inflation based on the Consumer Food Price Index (CFPI) accelerated to 8.94 per cent in October from 7.74 per cent in September. Rural food inflation stood at 9.09 per cent, while urban food inflation reached 8.68 per cent.
Nirav Karkera, Head of Research and Fund Manager at W by Groww, said food prices were responsible for about half of the overall inflationary pressure, with households in rural areas facing a greater impact because food accounts for a larger share of their expenditure. “Inflation has crossed the RBI’s 6 per cent upper limit, and about half of it is coming from food. Onion and garlic prices have shot up, and rural households feel this more because food takes a bigger share of what they spend,” Karkera said.
Vegetable Prices Drive Food Inflation
Among individual food items, onions recorded the highest inflation rate, with prices increasing 116.22 per cent year-on-year in October. This was higher than the 108.13 per cent increase recorded in September. Garlic inflation also accelerated to 60.74 per cent from 54.62 per cent, while lemon prices increased 47.30 per cent against 36.41 per cent in the preceding month.
Ginger inflation moderated to 48.32 per cent from 62.85 per cent in September. Some vegetables, however, recorded annual price declines. Potato prices fell 14.24 per cent, compared with an 11.52 per cent decline in September, while cauliflower prices decreased 10.57 per cent against 2.88 per cent previously.
Coconut prices declined 5.60 per cent year-on-year, while brinjal and cabbage recorded decreases of 3.34 per cent and 1.92 per cent, respectively. Despite these declines, the broader food and beverages category registered inflation of 8.51 per cent in October.
Karkera said underlying inflation remained close to 4 per cent after excluding food and precious metals, with rent, healthcare and education recording comparatively moderate increases. He added that the decline in gold and silver prices during October could provide some relief in the coming months.
“What we are watching is whether food costs spread. Eating out is already about 10% more expensive than a year ago. The bigger risk is fuel,” he said.
He also pointed to the possibility of higher fuel costs if crude oil prices remain elevated and the rupee weakens further. Retail fuel prices at state-run outlets have remained unchanged since May, although international crude prices and currency movements could influence future domestic pricing.
Price pressures were also visible in precious metal-linked consumer expenditure. Silver jewellery recorded inflation of 52.39 per cent in October on a year-on-year basis, although this represented a moderation from the 87.82 per cent increase recorded in September. The broader other personal effects category, which includes jewellery, registered inflation of 25.44 per cent.
Vivek Rathi, National Director Research at Knight Frank India, said sustained increases in consumer prices could affect household purchasing power and limit discretionary expenditure, including spending on housing. “The impact is likely to be more pronounced in the affordable and lower-income housing segments, where households are particularly vulnerable to increases in the cost of living,” Rathi said
Transport And Personal Expenses Add To Price Pressures
Transport inflation stood at 5.84 per cent during the month. Within the category, the operation of personal transport equipment recorded inflation of 7.52 per cent, while transport services for goods registered 7.34 per cent. Passenger transport services recorded a comparatively lower increase of 4.02 per cent.
Among other expenditure categories, restaurants and accommodation services recorded inflation of 10.06 per cent, while personal care, social protection and miscellaneous goods and services registered 10.14 per cent.
Clothing and footwear inflation stood at 4.96 per cent, while housing, water, electricity, gas and other fuels recorded an increase of 2.90 per cent. Health-related inflation remained relatively moderate at 2.05 per cent, while education services registered 4.02 per cent.
Karkera said the impact of the Goods and Services Tax (GST) reductions on year-on-year inflation calculations had largely played out, making the month-on-month movement in prices more important in assessing the direction of inflation. “We don’t expect quick relief. Winter vegetables should help, but probably not before early next year,” he said
Rural Inflation Higher Than Urban
The increase in retail inflation was more pronounced in rural areas, where the headline rate climbed to 6.63 per cent in October from 6.08 per cent in September. Urban inflation also accelerated, rising to 5.41 per cent from 4.88 per cent during the same period.
The difference was also visible in food prices, with rural food inflation increasing to 9.09 per cent from 8.06 per cent. Urban food inflation rose to 8.68 per cent from 7.18 per cent, indicating that food-related price pressures remained elevated across both segments.
“Oct CPI inflation at 6.09 per cent reflected the continued broadening of inflationary pressures and the transmission of global shocks, amid seasonal increases in clothing prices and higher car prices. Inflation is likely to print above 6 per centtuntil Jun’27,” said Tanay Dalal, SVP, Business Economic Research, Axis Bank.
The spread of price increases across the consumption basket also points to a broader inflationary trend. Nineteen of the 43 CPI sub-groups recorded inflation of at least 4 per cent in October, compared with 14 in September.
Tamil Nadu, Telangana Record Highest Inflation
Among states with populations exceeding 50 lakh, Tamil Nadu recorded the highest headline inflation at 7.29 per cent in October. Telangana followed at 7.26 per cent, while Andhra Pradesh registered 7.25 per cent.
Madhya Pradesh and Odisha also reported elevated inflation rates of 7.19 per cent and 7.17 per cent, respectively. Among the states, Mizoram recorded the lowest inflation at 2.85 per cent, followed by Meghalaya at 3.63 per cent. Delhi’s inflation rate stood at 3.80 per cent.
RBI’s December Policy Decision In Focus
The October inflation reading adds to the pressure on the RBI as it navigates rising consumer prices and the possibility of further monetary tightening. The central bank raised its benchmark repo rate by 25 basis points to 5.50 per cent in October, its first increase in nearly four years, citing elevated inflation expectations and signs of price pressures spreading across the economy.
The latest CPI reading of 6.09 per cent has now exceeded the RBI’s upper tolerance limit, while food inflation remains elevated across rural and urban markets. Aditi Nayar, Chief Economist at rating agency ICRA, said another 25-basis-point increase at the December monetary policy meeting appeared “almost certain”.
The inflation outlook is also clouded by agricultural risks. RBI Governor Sanjay Malhotra has flagged the potential impact of a weak monsoon and strong El Niño conditions on agricultural output and rural demand. However, adequate foodgrain stocks and government measures are expected to cushion the impact of possible supply disruptions.
The persistence of food price pressures could make it harder for the central bank to contain inflation without further tightening. The October reading also comes against the RBI’s earlier projection of 6 per cent inflation for the October-December quarter of FY27.
Nirav Karkera, Head of Research and Fund Manager at W by Groww, said the possibility of a measured rate increase in December had strengthened. “The RBI has already started raising rates, and odds are in favour of a measured hike in December,” he said.
For investors, Karkera said the latest inflation reading did not necessarily warrant immediate portfolio changes, recommending that investors remain aligned with their asset allocation strategies. He favoured shorter-duration bonds in the near term and companies with the ability to pass on higher input costs.
“While the current inflationary pressures are primarily supply-driven, their persistence could complicate the RBI’s monetary policy response. With the policy stance already hawkish, the possibility of a repo rate hike at the upcoming MPC meeting is apparent. The combined effect of elevated living costs and potentially higher borrowing rates could weigh on housing affordability, dampen homebuyer sentiment, and introduce some near-term tightness in the residential real estate market,” Rathi said.
