Retail inflation hits 6.09% in October, crosses RBI's upper tolerance limit

New Delhi: India’s retail inflation rose to a two-year high of 6.09% in October, up from 5.54% in September, primarily driven by elevated food prices and an unfavourable base effect.

Inflation has breached the Reserve Bank of India’s upper tolerance limit of 6% for the first time since the new series was rolled out in January 2026.

A Mint poll of 15 economists had estimated the consumer price index (CPI)-based inflation to rise to 6% in October.

Food inflation, a key component of the CPI, rose to 8.94% in October from 7.74% in September, 5.97% in August, 5.52% in July, 5.32% in June, according to provisional data released by the ministry of statistics and programme implementation on Thursday.

Persistently high inflation, compounded by elevated crude oil prices and risks to economic growth from the West Asia war, could further complicate the central bank’s policy decisions.

RBI raised interest rates by 25 basis points in the first week of October and shifted its monetary policy stance to calibrated tightening.

Higher inflation threatens to dampen consumer demand and weigh on economic growth. RBI governor Sanjay Malhotra had in October said that inflation and its outlook were not benign, adding that headline inflation was expected to average nearly 5.8% over the next three quarters.

In October, the RBI’s Monetary Policy Committee (MPC) raised its retail inflation projection for FY27 to 5.2%, from 5% in August, citing persistent supply-side pressures arising from deficient southwest monsoon rainfall, El Niño conditions and volatility in international oil prices. The RBI expects inflation to peak at 6% in the December quarter of FY27, then moderate to 5.7% in the March quarter.

Silver jewellery, along with vegetables such as onion, ginger, garlic and lemon, were among the items that recorded the strongest inflationary pressures, the data showed. Potato, tomato, lady finger, coconut and motor cars and jeeps were among the items with the lowest all-India inflation.

Inflation was highest in Andhra Pradesh, Telangana, Tamil Nadu, Madhya Pradesh, Puducherry, Dadra and Nagar Haveli and Daman and Diu, Uttar Pradesh and Odisha. It was lowest in Delhi, Mizoram, Tripura, Meghalaya, Lakswadeep, Arunachal Pradesh, Goa and Nagaland.

The personal care, social protection, and miscellaneous goods and services group recorded inflation of 10.14% in October, down from 13.75% in September. Prices of restaurant and accommodation services rose 10.06% against 9.36% in August.

The latest CPI data cannot be directly compared with the year-earlier period because the index was rebased in January, with 2024 as the new base year. Retail inflation was recorded at a revised 2.74% in January, when the new series was introduced.

The new index is based on spending patterns captured in the 2023-24 Household Consumption Expenditure Survey. Changes to the weights of individual components have modestly raised headline inflation readings, with the share of core items increasing by about 10 percentage points and volatile food prices accounting for a smaller share.

The new series also increases the weight of housing, changing how inflation is measured and potentially moderating volatility in the headline reading. Housing inflation stood at 2.90% in October, compared with 2.74% in September.

The updated index gives policymakers a more recent basis for assessing changes in household purchasing power, real incomes and consumption patterns.

The West Asia war has weighed on India’s economy, contributing to currency weakness and heightening stagflation risks. However, gross domestic product (GDP) growth remained firm at 7.8% in the June quarter of FY27, even as various agencies expect growth to moderate over the current fiscal year.

The RBI expects India's real GDP growth to reach 7.1% in FY27, up from its August projection of 6.7%, supported by resilient domestic consumption, strong investment activity and sustained momentum in services. Moody’s Ratings, in its latest November assessment, retained its FY27 growth forecast at 7%, following an upward revision from 6% in September.

Earlier, the World Bank also raised its growth projection for India to 7.1% for the fiscal year, from 6.6% earlier. The Asian Development Bank, in its September 2026 Asian Development Outlook, raised its FY27 growth forecast to 7%, from 6.6%.

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Dhirendra Kumar is a seasoned policy reporter with about 20 years of experience in deep, on-ground reporting across key economic and governance sectors. His work spans finance, public expenditure, disinvestment, public sector enterprises, textiles, trade, consumer affairs, and agriculture, with a strong focus on uncovering structural policy shifts and their real-world impact.<br><br>Kumar has been awarded the Chaudhary Charan Singh Award for Excellence in Journalism in Agricultural Research and Development, recognising his contribution to reporting on critical issues in the farm sector. He has also been a recipient of a fellowship in international trade from the National Press Foundation, which has further strengthened his coverage of global trade dynamics and their implications for India.<br><br>Kumar is known for breaking complex policy developments into clear, accessible stories. His reporting focuses on uncovering under-reported trends, explaining policy shifts, and helping readers stay informed about developments that shape India’s economic landscape.

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