India's retail inflation likely rose to a 20-month high of 4.9% in August, accelerating from 4.5% in July, driven by higher fuel and food prices amid weak rainfall, a Mint poll of 21 economists showed.
This would be the third straight month above the Reserve Bank of India’s (RBI) medium-term inflation target and the highest reading in the current 2024 Consumer Price Index (CPI) series. It would also be the highest since December 2024, although the older back-series data is not strictly comparable with the current series.
Economists polled by Mint projected CPI inflation in a range of 4.5-5.1%, with all but one expecting retail inflation to rise. The official data is scheduled to be released on 14 September.
The RBI held the policy interest rate steady last month as consumer inflation remained within its 2-6% tolerance band, but indicated it could tighten policy if price pressures intensified.
The monsoon has been weak and uneven, potentially hurting farm output and pushing up food prices, while the ongoing war in West Asia has driven up crude oil prices.
Broader pressure
“While food inflation remains the primary driver of the headline print, the more important signal from the August data may be the increasing evidence of cost pressures filtering through a wider set of consumption categories,” said Societe Generale.
Food, which constitutes nearly 35% of the overall consumer inflation basket, has been the primary factor driving headline inflation up. Food inflation stood at 5.5% in July, sharply up from 2.1% in January 2026. Transport inflation also crossed the 4%-mark in June and stood at 4.4% in July.
Core inflation, which excludes the more volatile food and fuel prices, also stood at 4%. “Food inflation is becoming increasingly broad-based, whereas gradual strengthening in core inflation—particularly after excluding auto fuel and precious metals—indicates that underlying inflationary pressures are slowly gaining traction,” said Union Bank of India in a report last week.
Crude risk
Should August print come as expected, the average inflation print for July-August would be 4.7%—in line with the RBI’s latest projection for the July-September quarter. However, with the Brent crude oil price jumping above the $ 100-per-barrel mark again, the risks from the West Asia war continue along with the delayed pass-through of previous rises. The RBI expects inflation to rise to 5.9% in October-December, before easing to 5.5% in January-March.
While the RBI's Monetary Policy Committee (MPC) held the policy repo rate steady at 5.25% in August, it noted that the inflation outlook was “hazy” and there was a need for greater clarity to emerge before taking any policy action. Economists also believe the RBI will remain data-dependent before taking a call on a rate hike, though it can be expected by December if price pressures keep rising at the current pace.