India's retail inflation rose to 6.09% in October, breaching the Reserve Bank of India's 6% upper tolerance limit for the first time in two years, as soaring food prices squeezed household budgets. The figure, released by the Ministry of Statistics and Programme Implementation on Thursday 12 November, was up from 5.54% in September.

Food inflation drove the increase, climbing to 8.94% in October from 7.74% the previous month. Onion prices recorded inflation of 116.22%, while garlic rose 60.74%, ginger 48.32% and lemon 47.30%. Food accounts for nearly 40% of India's consumer price index, so the jump in staple prices fed directly into the headline rate.

Above target for a fifth month

Inflation has now stayed above the central bank's 4% medium-term target for five consecutive months. The October reading also came in above the 5.93% forecast by economists in a Reuters poll. It was the first breach of the 6% ceiling under the new CPI series; under the earlier series, inflation last rose above 6% in October 2024, when it reached 6.21%.

Core inflation, which strips out volatile food and fuel prices, also picked up, reaching 4.5% in October from 4.3% in September, according to IDFC First Bank. The Reserve Bank expects inflation to average 6% in the October to December quarter and 5.2% across the current financial year.

Rate rises now look more likely

The stronger-than-expected reading has bolstered bets on further interest rate rises. India's policy rate stands at 5.50%, and analysts say the central bank will face pressure to act if food prices stay high. A weak monsoon this year has been blamed for much of the food price pressure, and economists expect headline inflation to remain around 6.1% in November.

Sources: The Hindu BusinessLine, Reuters