India Inflation Rises to 4.82%
India’s retail inflation accelerated to 4.82% in August as food, transport and broader price pressures increased, strengthening expectations of a possible Reserve Bank of India rate hike.
India’s annual retail inflation rose to 4.82% in August, up from 4.45% in the previous month, as price pressures spread beyond food and transport. The reading was also marginally higher than the 4.80% inflation expected by economists in a Reuters poll.
The August figure was the highest recorded under India’s new inflation series, which began in January. Despite the increase, inflation remained within the Reserve Bank of India’s 2%-6% target range.
Food inflation climbed to 5.95% in August from 5.52% in July, supported by weak monsoon showers and sharp increases in the prices of staples including ginger, onion and garlic. Transport inflation also accelerated to 4.60% from 4.43% in July.
The broader increase in prices has strengthened expectations that the RBI could move towards tighter monetary policy. The central bank kept its benchmark policy rate unchanged at 5.25% last month, although minutes of the meeting showed that some RBI officials, including Governor Sanjay Malhotra, favoured raising rates if inflation became more widespread.
ICRA chief economist Aditi Nayar said her base case was for a potential rate increase in December 2026 if inflationary pressures become more generalised and crude oil prices remain elevated. However, she said an increase could come as early as the RBI’s next meeting in October if high crude prices persist.
“Our base case is that a rate hike could materialise in the December 2026 meeting, particularly if there is evidence of a generalisation in inflationary pressures and crude oil prices sustain at elevated levels.”
India imports nearly 85% of its oil requirements, with more than half coming from the Middle East. Supply disruptions linked to the U.S.-Iran war have contributed to higher global oil prices, with Brent crude futures trading near $108 a barrel.
Higher energy costs could add further pressure to domestic inflation. Government-owned fuel retailers have not recently adjusted petrol and diesel selling prices, but the acceleration in transport inflation already reflects increasing fuel-related pressures.
The RBI last increased interest rates in February 2023.