By Dr. Gyan Pathak
The Consumer Price Index (CPI) released on November 12, 2026, has just quantified the level of shock people of India had to undergo during festive season in October. Retail inflation year on year basis breached the tolerance level and reached 6.09 per cent, first time in the last two years. Food price shock was even harsher with food inflation reached 8.94 per cent. Worst hit were rural people where food inflation shot up to 9.09 per cent. Increase in real earning, however, has been estimated at 4.1 per cent, making the rise in inflation a serious concern, because food price shock is likely to rock the months ahead.
The October figures are a warning. The concern is not merely that inflation has crossed the tolerance band set by the Reserve Bank of India (RBI), but that the food inflation has accelerated sharply, rural inflation is higher than urban inflation, and there are indications that price pressures are spreading beyond vegetables into other food items and manufactured goods. The real concern is that India could experience a prolonged cost-of-living shock, even if headline inflation eventually falls back below the tolerance level. India is perhaps entering a potentially difficult period in which food inflation, rural purchasing-power erosion and monetary tightening could reinforce one another.
Three developments make the outlook ahead uncomfortable. First the food price shock is becoming broader. October food inflation reached 8.94%, compared with 7.74% in September. The monthly food-price index also increased approximately 0.94% in October. This is important because it shows that the increase is not simply an annual base-effect phenomenon. There was an actual increase in the price index during the month.
Secondly, the agricultural supply outlook ahead is uncertain. The southwest monsoon ended below normal, with uneven rainfall affecting agricultural prospects. The coming rabi harvest is therefore particularly important. Lower reservoir levels and soil-moisture concerns could affect production of cereals, pulses and oilseeds. ICICI Bank’s November assessment warns that food inflation could remain elevated over the coming quarters.
Thirdly, the inflation is spreading beyond food. It has already been reported that economists are concerned about higher energy and raw-material costs passing into manufactured goods and services. The risk is that an initial food-price shock may become a broader inflation problem. Once higher food and input costs influence wages, transport, restaurants, manufacturing and services, inflation becomes harder to reverse.
The most serious consequence will be the increased pressure on poor households or the population that live just above the poverty line. For poor rural households, it will mean reduced food quality and essential consumption. Landless agricultural labourers are particularly vulnerable to food inflation and weak employment scenario.
For lower middle income household, it would mean reduced savings and increased borrowings. For middle-income households it would mean reduced discretionary consumption. Only the wealthy household would feel relatively limited impact.
Food price shock, if continued, that is likely to be, as per several assessments, may bring for many a poverty trap – food prices increase, real purchasing power declines, nutrition, healthcare and education expenditure falls, productivity and future earning capacity weakens, and finally land on to a situation of greater poverty and vulnerability. Moreover, a single medical event in the family may push many households further in poverty.
In this scenario, India should prepare for a prolonged food-affordability problem rather than assume that the October inflation increase will automatically reverse. The next rabi harvest, the trajectory of pulses and edible oils, rural wages and the November–December CPI readings will determine whether the shock becomes persistent.
The greatest risk is that, if food prices go on rising for next few weeks, the poor households may lose for a long time their purchasing power, nutrition, and economic security ever after headline inflation eventually comes down.
If we look at the food vulnerability in the states, we can clearly see that Odisha, Madhya Pradesh and Chhattisgarh are particularly vulnerable. They combine relatively high rural inflation with low average rural consumption expenditure. Uttar Pradesh and Jharkhand face a double burden. Their rural consumption levels are low, while rural inflation is elevated. But Bihar is a peculiar case. Its rural inflation is below the national rural rate, but its low consumption capacity keeps it in the relatively vulnerable group.
The next level of assessment, if rural wages are taken into consideration, reinforces the vulnerability of several states – the worst of which will be Madhya Pradesh where agricultural wages are approximately 36 per cent below the national average, Bihar where wages are 9 per cent below, Uttar Pradesh where 11 per cent below, and Odisha where 7 per cent below national average. These are historical benchmark. But they indicate that high inflation combined with weak earning can be particularly damaging.
The HCES 2023–24 reports that food accounts for 48.43% of average rural monthly per-capita consumption expenditure. Meanwhile, October 2026 rural food inflation was 9.09%. This means that, holding quantities and the non-food basket constant, the average rural consumption basket faces approximately 4.4% additional expenditure pressure from food prices relative to a year earlier.
This warns us of considerable challenge ahead, if not tackled properly, may induce a serious cost of living crisis in India in general, and in rural areas in particular. (IPA Service)
