Retail inflation rises to 5.54% in September as food prices climb

India's retail inflation rose to 5.54 per cent in September from 4.83 per cent in August, according to provisional data released on Monday by the Ministry of Statistics and Programme Implementation. Food prices drove most of the increase.

Inflation as measured by the Consumer Food Price Index rose to 7.74 per cent, from 5.97 per cent a month earlier. Prices rose faster in villages than in cities. Rural inflation was 6.08 per cent and urban inflation 4.88 per cent, and food inflation stood at 8.06 per cent in rural areas against 7.18 per cent in urban areas.

Onions lead the rise

Business Today's analysis of the data shows onion prices up about 108 per cent from a year earlier, after a rise of about 49 per cent in August. Ginger, garlic and lemons also became much costlier. Potatoes and tomatoes were cheaper than a year ago. Outside food, restaurant and accommodation services rose 9.36 per cent, and silver jewellery prices climbed sharply.

Among large states, Tamil Nadu, Odisha, Madhya Pradesh and Telangana recorded some of the highest inflation rates, above 6.5 per cent each. Delhi was among the lowest, at 3.40 per cent.

Pressure on the RBI

The data come less than a week after the Reserve Bank of India raised its repo rate by 25 basis points to 5.50 per cent on October 7. The central bank also shifted its policy stance from neutral to what it called "calibrated tightening". It said food and fuel prices, a weak monsoon, volatile crude oil and global tensions were adding to price risks, and projected inflation at 5.2 per cent for 2026-27.

The September reading is above that full-year projection and close to the upper limit of the RBI's tolerance band of 2 to 6 per cent. That raises the question of whether more rate hikes will follow.

Separately, stock markets were under pressure on Monday. The Sensex fell 547.65 points, or 0.76 per cent, to close at 71,924.68, and the Nifty 50 lost 157.10 points to end at 22,363.35. Analysts linked the fall to continued selling by foreign investors, rising bond yields and tension in West Asia. Small-cap shares bucked the trend and gained.

Why it matters

Higher food inflation squeezes household budgets, especially in rural India, where food takes up a larger share of spending. If prices keep rising, loan rates could go up further, which affects borrowers and businesses alike. The October inflation figures are due on November 12.