Retail inflation is expected to cross the 6 per cent mark in October due to rising food prices. Aditi Nayar said, "ICRA expects the headline CPI inflation print to harden to 6.1 per cent in October 2026." The Statistics Ministry will release the official data on November 12 for everyone.
Rising food prices are expected to push October's CPI-based retail inflation past the 6 per cent mark. If official data confirm the print, it will mark the first breach of the RBI's upper target band since October 2024 and the 28th instance since flexible inflation targeting began on June 27, 2016. This makes a strong case of policy rate hike in December when MPC meets.
The Statistics Ministry will formally release the retail inflation data on November 12. Headline inflation rose to a 23-month high of 5.5 per cent in September from 4.8 per cent in August, driven by a broad-based increase in food, fuel and core (CPI excluding food and fuel) components
Higher food prices
There has been persistent rise in many of the food items in October. According to the latest edition of the RBI bulletin, during October 1-19, high-frequency data suggest broad-based increase in food prices. Among cereals, rice and wheat prices continued to increase. Prices of major pulses also went up sequentially. Edible oil prices also recorded a slow and broad-based increase, led by mustard and palm oil. Among vegetables, while potato prices declined and the pace of onion price increases dropped, tomato prices picked up
Inflationary expectation for food is showing upward trend because of El Nino impact. Data from Agriculture Minister showed that as on October 30, rabi showing was down by 46 per cent as compared to previous year. Expectations from kharif harvesting is also not so optimistic, which are having an impact on the prices. There could be some base impact. In this context, economists feel headline inflation is likely to have breached the upper level of targeted inflation range which is 2-6 per cent.
"ICRA expects the headline CPI inflation print to harden to 6.1 per cent in October 2026 from 5.5 per cent in September 2026, crossing the upper limit of the MPC's target range, partly owing to the unfavourable base on account of the GST rationalisation," said Aditi Nayar, Chief Economist at ICRA Ltd. Further she said that inflation in the food and beverages division is set to cross the 8 per cent mark in October, amid a broad-based hardening across sub-segments, while core-CPI (Excl. F&B, electricity, gas & other fuels, and petrol, diesel) inflation is expected to rise to 4.6 per cent in the month from 4.3 per cent in September 2026.
Inflationary pressure
If the recent cooling in global crude oil prices sustains, it would likely contain the need for OMCs to hike petrol and diesel retail selling prices further, thereby curtailing another round of inflationary pressures in the economy. Nevertheless, "ICRA expects the CPI inflation to average at 5.2 per cent in FY2027, albeit with the H2 FY2027 readings centred around 5.9 per cent," she said.
It is important to note that wholesale inflation, based on Wholesale Price Index (WPI) in September surged to 11.4 per cent in September mainly on account of higher food prices. There is apprehension that rise in wholesale inflation could be transmitted in retail inflation.
However, in a note, Aastha Gudwani (India Chief economist at Barclays) and Amruta Ghare (Economist at Barclays) have expressed different opinion. "While the direct and immediate impact from WPI to CPI may be moderate, upside risks to CPI inflation remain from another round of pump price hikes for petrol and diesel (if crude oil prices remain elevated), disappointing rabi harvest impacting food prices in FY27-28, and faster pass-through by firms after initial margin compression in sectors where demand is strong," they said.