Retail Inflation Rises to 5.54% in September on Food Price Spike

Indian Retail Inflation shot up to 5.54 percent in September as compared to August which was at 4.83 percent due to food prices soaring. This was seen from the data released by Ministry of Statistics and Programme Implementation (MoSPI) on Monday, October 12th.

Food inflation as measured by Consumer Food Price Index jumped to 7.74 percent from 5.97 percent last month. Headline Inflation using the revised series of CPI taking 2024 as the base year continues to be higher than the target of 4 percent set by RBI but still falls under the acceptable range of 2-6 percent.

Rural prices rise faster

Rural households bore the brunt of the increase. Rural inflation rose to 6.08% from 5.24% in August, while urban inflation climbed to 4.88% from 4.31%. Food inflation stood at 8.06% in rural areas and 7.18% in urban centres.

Onions led the surge, with prices up 108.09% from a year earlier, compared with 48.78% in August. Ginger rose 62.85%, garlic 54.62% and lemons 36.41%, while silver jewellery was up 87.80%.

Some items offered relief. Potato prices fell 11.50% and tomato prices declined 8.62%. Among broader groups, restaurants and accommodation saw inflation of 9.36%, transport 5.01% and housing, water, electricity and gas 2.74%, while health was at 1.40%.

Price pressures were uneven across states. Tamil Nadu recorded the highest inflation at 6.81%, followed by Odisha at 6.70% and Madhya Pradesh at 6.68%. Delhi was among the lowest at 3.40%, according to the MoSPI data reported by Business Today.

RBI already in tightening mode

The data comes less than a week after the RBI’s Monetary Policy Committee voted unanimously on October 7 to raise the repo rate by 25 basis points to 5.50%. It was the central bank’s first rate increase since February 2023, and the committee changed its stance from neutral to “calibrated tightening”.

At that meeting, the RBI raised its FY27 inflation projection to 5.2%. It expects inflation to average 6% in the October–December quarter and 5.7% in January–March. Governor Sanjay Malhotra described the inflation outlook as “not benign” and indicated that rate cuts were off the table in the near term.

Prasanna Tantri, professor at the Indian School of Business, said in a post on X that the central bank was late in raising rates. “We cannot sustain zero real interest rates,” he wrote, warning that keeping rates artificially low could add to price pressures.

For businesses, higher food and input costs combined with tighter monetary policy could weigh on consumer demand and raise borrowing costs in the second half of the financial year.

MoSPI will release CPI data for October on November 12. The numbers will indicate whether food prices, particularly onions, ease with fresh arrivals, and will shape the MPC’s decision on whether further tightening is needed.