India’s retail inflation hits 6.09% in October, breaches 6% of RBI's limit for first time

India's retail inflation rose to 6.09 per cent in October, breaking the 6 per cent ‌limit set by the central bank. This marks the first time under the new series, as rising food prices forced households to spend less. Economists had predicted that inflation would rise from 5.54 per cent in September to 5.93 per cent in October, according to a Reuters poll.

High inflation in October was largely the outcome of an increase in food prices, accounting for nearly 40 per cent of India's consumer price index. In September, food inflation was 7.74 per cent, which rose to 8.94 per cent in October after the prices of onions, garlic and ginger climbed.

For five consecutive months, the country's inflation has remained above the ⁠Reserve Bank of India's 4 per cent medium-term target. The last time inflation breached its 6 per cent limit was in October ​2024, when it reached 6.2 per cent under the previous 2012 prices-based CPI series.

"The data reinforces our expectation of ​a second successive rate hike in December," said Radhika Rao, senior economist and executive director at DBS Bank, and added that headline inflation is expected to rise to a peak.

Concerns over rising inflation

Citing mounting inflationary pressures, the RBI raised its benchmark repo rate last month for the first time in nearly four years, aligning with similar moves by central banks worldwide. The decision reflected concerns over rising inflation expectations and price pressures spreading across sectors.

According to minutes from the rate-setting panel’s meeting, additional hikes could be on the table to keep inflation in check, though members stopped short of backing an aggressive tightening approach, wary of the potential drag on economic growth. Following the increase, the policy rate now stands at 5.50 per cent.

The central bank projects inflation will average 6 per cent during the October-December period and has revised its full-year forecast upward to 5.2 per cent, from the previous estimate of 5 per cent.