India’s consumer price index (CPI) inflation likely rose to a 20-month high of 4.8% in August driven by higher food prices, according to an FE poll of 13 economists.
A quicker increase in prices in August would mark the 10th consecutive month of rise in retail inflation. It would also be the third consecutive month inflation is higher than the Reserve Bank of India’s (RBI) medium-term target of 4%, increasing expectations of an interest rate hike in the second half of 2026-27, economists said.
CPI inflation was 4.45% in July and 2.01% in August 2025. Estimates in the poll ranged between 4.5% and 4.9%. The Ministry of Statistics and Programme Implementation will release CPI data for August on September 14.
A rise in food prices is seen as the primary reason for higher CPI inflation in August but fuel and core inflation are also expected to rise in August, economists said.
CPI food and beverages inflation is seen rising to around 6% in August from 5.24% in July with price pressures becoming more generalised, economists said. “The rise in food prices is likely to be led by sugar prices while prices of cereals, milk and eggs, oils and fats, and meat are also seeing sustained uptick,” economists at Nirmal Bang Equities said. Among vegetables, onion prices rose month-on-month in August while prices of other vegetables were muted.
Fuel inflation is also seen rising in August, reflecting the impact of petrol and diesel price hikes earlier in the year. Higher cooking gas prices and the surge in international crude oil prices are expected to keep fuel inflation on an upward trajectory, Union Bank of India’s Chief Economic Advisor Kanika Pasricha said.
“While the absence of significant revisions in petrol and diesel retail prices continues to limit the immediate pass-through to consumers, sustained firmness in global energy markets poses upside risks over the medium term,” Pasricha said.
Core inflation, which excludes fuel and food items, is also projected to rise in August because of steeper gold and silver prices, economists said. Core inflation is seen rising above 4% in August having stayed at 3.9% for the last three months.
Other indicators of core inflation, such as one excluding gold and silver, are also expected to have risen in August. “The broad-based increase across various core indicators suggests that demand-side price pressures are slowly becoming more entrenched,” Pasricha said.
As inflation continues to rise, and GDP growth outperforms expectations, the RBI’s Monetary Policy Committee (MPC) is expected to raise the repo rate by 50 basis points between October and March from the current 5.25%, economists said.
The RBI projects CPI inflation to average 5.0% in FY27, with July-September inflation seen at 4.7%. Inflation if projected to peak in the October-December quarter at 5.9%, just below the upper bound of the RBI’s 2-6% comfort band.
Members of the MPC have already hinted at the prospect to raising interest rates to control inflation. RBI Deputy Governor Poonam Gupta in the minutes of the August MPC meeting had said that “a case for a hike may emerge during the course of the year” given that the headline inflation is projected to peak at 5.9% in Q3YF27.
Source- The Financial Express
