NEW DELHI: India’s retail inflation rose above the Reserve Bank of India’s (RBI) 2-6% tolerance range for the first time since October 2024, hitting a 2-year high of 6.09% in October and firming expectations of more interest rate hikes this financial year, data released by the statistics ministry on Thursday showed.
The rise in consumer price index (CPI) inflation from 5.54% in September was led by higher food prices, but prices pressures intensified across the board with inflation rising across 11 of 12 major CPI divisions. Core inflation continued to rise in October, reflecting the broadening price pressures.
An unfavourable base effect also pushed the headline print higher. CPI inflation was 0.04% in October 2025, resulting in a base effect for the latest print.
“October CPI data show that India’s elevated inflation is not merely a transitory, energy-driven supply shock,” said Dhiraj Nim, senior economist, ANZ Bank India. “Acute pipeline price pressures are also likely feeding through to consumer prices more visibly, beyond energy-sensitive CPI. With WPI and PPI inflation still in double digits and growth broadly resilient, further passthrough to consumer prices is highly likely,” Nim said.
October marked the 12th straight month of rising retail inflation. Inflation has also stayed above the RBI’s medium-term target of 4% for five consecutive months now.
Retail inflation is expected to stay around 6% over the next few months, with the RBI projecting price increases to average 6% in the October-December quarter, and then ease slightly to 5.7% in January-March.
“The current projected trajectory indicates headline inflation staying above the 6% upper tolerance level until June 2027,” Axis Bank economists said in a note. “While projections now imply headline inflation of around 5.4% in FY27, reduction to around 5% in FY28 will require core inflation to come back below 4% – an eventuality that is not at all certain,” the economists said.
With inflation projected to remain high in the near future, the RBI’s Monetary Policy Committee (MPC) last month raised interest rates for the first time in nearly four years, hiking the repo rate by 25 basis points to 5.50%. Economists expect the RBI’s rate-setting panel to raise interest rates by another 50 basis points in FY27, and potentially more if price pressures persist.
The October inflation print, despite being at a two-year high print, was along expected lines. Economists polled by FE has estimated October CPI inflation at 6.1%, up from 5.54% in September.
Food inflation rose to a series high of 8.94% in October from 7.74% in September, reflecting impact of weak monsoon and El Nino-related weather disruptions.
Onion saw the highest inflation in October at 116.22%, up from 108.13% in the previous month. Food items such as garlic, ginger, lemon, and sugar saw an inflation rate of around 50% in October. Cereals, other vegetables, pulses, oils and fats also saw higher inflation in October.
Core inflation, which strips out food and fuel items, rose to a series high of 4.5% of October from 4.3% in September. The RBI projects core inflation to average 4.4% in the current financial year.
“Core inflation is expected to inch up further in November 2026, partly owing to the unfavourable base effect arising from GST rationalisation, which would keep the headline CPI inflation elevated at around 6.1% in the month,” said Aditi Nayar, chief economist at ICRA.
Sequentially, retail food prices rose 0.9% in October, which led to a 0.5% month-on-month rise in the headline index from September. This was the slowest month-on-month rise in the headline consumer price index in six months.
Eating out continued to become more expensive, with food and beverage serving services inflation rising to 10.09% in October from 9.39% in September.
Fuel price inflation remained high in October. Inflation in the fuels and lubricants for personal use was 7.60% in October compared with 7.59% a month ago.
Transport services for goods fell sharply to 7.34% in October from 14.73% in September. Transport services for goods mainly track price changes in postage, couriers, and money orders.
Personal care, social protection and miscellaneous goods and services was the only CPI division where inflation moderated in October. The category’s inflation eased to 10.14% last month from 13.75% in September due to lower jewellery inflation.
Gold, diamond, platinum jewellery inflation fell to 19.83% in October from 30.92% in September. Silver jewellery inflation fell sharply to 52.39% last month from 87.82% in September.
Inflation increased in the information and communication equipment category, driven by a surge in mobile, computers, and memory storage devices.
Mobile inflation rose to 8.65% in October from 5.83% in September, while computers, laptops and tablets inflation increased to 8.61% from 6.46% in September.
Inflation in the pen-drive and external hard disk category was 22.03% in October, up from 19.26% in September, reflecting the surge in global memory and chip prices due to the demand from artificial intelligence companies.
October also marked the first clean comparison with the full-month impact of the goods and services tax (GST) rate reductions implemented in late September 2025, which were fully reflected in the October 2025 data. The waning of the GST rate cut impact was visible across a few sectors, and notably in vehicle purchases.
Purchase of vehicles inflation rose to 2.65% in October, having stayed in the deflation zone throughout 2026. Purchase of vehicles inflation was -2.56% in September.
Source: The Financial Express
