India’s annual retail inflation increased to 5.54% in September, up from 4.82% in August, according to data released Monday by the country’s Ministry of Statistics and Programme Implementation. The rise in the consumer price index (CPI) was attributed primarily to higher food and transportation costs.
The September inflation figure was slightly above the 5.40% median forecast from a Reuters poll of economists. According to the ministry’s report, the data marks an 11-month upward trend in the inflation rate, reaching a 22-month high.
The official release provided a breakdown of the price increases. Food inflation, which carries significant weight in the CPI basket, climbed to 7.74% in September from 5.97% the previous month. The ministry noted that price increases were more pronounced in rural areas compared to urban centers. Transportation costs also saw a notable rise, with inflation for goods transport services at 14.73% and personal transport services at 7.46%.
The inflation data follows a recent policy adjustment by the Reserve Bank of India (RBI), the nation’s central bank. Earlier in October, the RBI raised its key interest rate for the first time since 2023. In a statement accompanying the decision, the central bank said that further rate cuts were “off the table in the near term” and that future policy action would likely be either another rate hike or a pause.
The RBI has also updated its economic projections. The central bank forecasts headline inflation to average 5.2% for the fiscal year ending in March 2027, which is above its medium-term target of 4%. Concurrently, the RBI increased its economic growth estimate for the same period by 40 basis points to 7.1%. In its commentary, the bank cautioned that geopolitical tensions, trade frictions, and international commodity prices could affect economic activity.
Adding to economic considerations, the India Meteorological Department reported that the country experienced its lowest monsoon rainfall in over a decade from June to September. The rainfall was recorded as the fourth lowest since 2001 and the 13th driest since 1901.
In a separate report on Oct. 7, financial services firm HSBC stated that it expects another rate hike from the RBI in December. “This may not be a deep tightening cycle, but a tightening cycle it is,” HSBC analysts wrote.
