India’s CPI Inflation Climbs to 5.5% in September, Near Two-Year High

Food inflation accelerated to 7.4%, driven by higher vegetable, sugar and edible oil prices, while broad-based price pressures and weather-related risks raise concerns about the inflation outlook.

India’s Consumer Price Index (CPI) inflation rose to 5.5% in September 2026, from 4.8% in August, reaching a 23-month high and remaining above the Reserve Bank of India’s (RBI) 4% target for the fourth consecutive month. According to CareEdge, inflation accelerated across 11 of the 12 major CPI divisions, indicating that price pressures are becoming more widespread.

The CPI diffusion index, which measures the breadth of price increases across categories, climbed to 82 in September from 72 in August. A reading above 50 indicates that more components are recording rising inflation than falling inflation.

Food and Beverage Inflation Rises to 7.4%

Inflation in food and beverages increased sharply to 7.4% in September from 5.7% in the previous month. Prices remained elevated across vegetables, fruits, rice, pulses, sugar and edible oils.

Vegetable inflation rose to 10.8% year-on-year (YoY) from 1.1% in August. The increase was driven by persistently high onion prices, with onion inflation climbing to 108.1% from 48.8%, amid tight supplies during the transition between the previous rabi harvest and the arrival of the new kharif crop.

Sugar inflation edged up to 28% YoY, reflecting expectations of lower sugarcane yields and a shift towards ethanol production, which tightened domestic sugar availability.

Edible oil inflation remained elevated at 9.9%. Higher global prices and India's dependence on imports continue to pose concerns. According to the Food and Agriculture Organization (FAO), global vegetable oil prices increased 18.3% YoY in September.

Transport and Service Costs Add to Inflationary Pressures

Global energy prices remained volatile amid the ongoing conflict in West Asia. Higher energy costs contributed to transport inflation, which increased to 5.0% in September from 4.6% in August.

Inflation in restaurants and accommodation services rose to 9.4% from 8.4%, as elevated cooking fuel and food prices continued to affect costs.

The information and communication category also recorded an increase, with inflation reaching 2.4% YoY from 2.0% in August. Price increases were observed in external hard disks, mobile phones and laptops, reflecting robust global demand for memory chips amid the artificial intelligence (AI) boom.

Core inflation, which excludes food and beverages, fuels and lubricants for personal transport equipment, and electricity, gas and other fuels, edged up to 4.3% from 4.2%.

Inflation Accelerates Across Most CPI Divisions

September data showed an increase in inflation across most major consumer expenditure categories. Restaurants and accommodation services recorded the highest inflation rate among the listed divisions, followed by personal care and miscellaneous items.

The following table presents the year-on-year inflation rates for selected categories in August and September 2026.

Source: Ministry of Statistics and Programme Implementation (MoSPI), CareEdge.

Weather Conditions and Global Energy Prices Pose Risks

The inflation outlook remains exposed to external and weather-related risks, according to CareEdge. Uncertainty surrounding transit through major maritime chokepoints continues to influence global energy prices.

Domestically, the below-normal monsoon remains a concern. The 2026 southwest monsoon ended 13% below the long-period average in both spatial and temporal terms. Kharif sowing declined marginally by 1.1% YoY, while final production outcomes will depend substantially on crop yields.

The upcoming rabi season is also beginning from a weaker base. Reservoir storage levels stood at 72% of Full Reservoir Levels (FRL), while soil moisture conditions remained below seasonal norms in several regions.

El Niño is expected to intensify further through the remainder of the year, increasing the risk of more frequent, prolonged and severe heatwaves. The government has also flagged the possibility of drought conditions in several states.

These factors have kept concerns about agricultural yields elevated. However, ample buffer stocks are expected to provide a degree of protection against cereal price increases. Edible oil prices remain another key area to monitor because of India's significant import dependence and high international prices.

The RBI's September Inflation Expectations Survey also indicated a sharp rise in household inflation expectations.

Food Inflation Expected to Remain Elevated

The trajectory of food inflation will depend on the progress of the kharif harvest and developments in rabi sowing over the coming months.

CareEdge noted that if food prices become the primary source of inflationary pressure, monetary tightening alone may prove insufficient. Additional administrative and fiscal measures could be required to improve supplies and contain food-price volatility.

The government has already reduced customs duty on imports of crude and refined edible oils ahead of the festive season.

CareEdge expects food inflation to remain elevated, reaching a peak of 7.7% in the third quarter of FY27 and averaging around 6.2% for the full fiscal year.

CPI Inflation Projected to Peak in Q3 FY27

CareEdge projects headline CPI inflation to peak in the third quarter of FY27 and average around 5.0% for the full fiscal year.

With inflation expectations rising and price pressures spreading across categories, the report indicates that there may be room for an additional 25–50 basis points of rate hikes going forward.

The inflation trajectory in the coming months will depend on food supply conditions, agricultural yields, global energy prices and the extent to which price increases spread across the wider economy.