India’s retail inflation has accelerated to 4.82% in August 2026 from 4.45% in July, as food prices and other key components of the consumer basket exerted pressure on the economy, according to data released by the government on Monday.
The latest reading depicts that the price pressures are beginning to build after inflation remained relatively subdued through much of the first half of the year. Rural CPI inflation came in at 5.23% in August, compared with 4.31% in urban areas.
A Reuters poll of economists had projected retail inflation at 4.80% for the month, with estimates ranging between 4.40% and 5.05%.
The July reading comes after retail inflation breached the Reserve Bank of India’s medium-term target of 4% in June, when it rose to 4.38% from 3.93% in May. The August inflation also marked the highest reading since India adopted its revised CPI series with a new base year and updated consumption basket earlier this year.
The RBI is mandated to maintain headline retail inflation at 5% for FY27.
Sugar prices hit a record high in August, likely impact inflation during the month. India’s ban on sugar exports to cool domestic prices, which began in May, will stay in place until end- September.
Jewellery prices remained a major source of inflationary pressure in August, with silver jewellery recording inflation of 107.11%, making it the highest among the key items tracked in the CPI basket, although this was lower than 109.89% in July. Inflation in gold, diamond and platinum jewellery, meanwhile, rose to 35.53% in August from 32.98% in July.
The personal care, social protection and miscellaneous goods and services category recorded inflation of 15.17% in August. Within the category, inflation in other personal effects stood at 44.56%, indicating continued price pressure in this segment.
Services-related inflation also remained elevated. Restaurants and accommodation services recorded inflation of 8.38% in August, while food and beverage serving services registered 8.41%. Both were substantially above the overall CPI inflation rate, pointing to continued price pressures in consumer-facing services.
Transport services for goods recorded inflation of 14.64% in August, while inflation in the operation of personal transport equipment stood at 7.40%. Passenger transport services saw comparatively moderate inflation of 3.39%.
Food prices remain key inflation driver
Retail food inflation rose to 5.95% in August from 5.52% in July, with rural food inflation at 5.64% and urban food inflation at 6.13%.
Onion inflation more than doubled to 48.27% in August from 22.54% in July, while garlic inflation rose to 43.60% from 35.36%. Ginger, however, saw some moderation, with inflation easing to 73.82% in August from 83.57% in July.
At the other end, several vegetables continued to record price declines, cushioning the broader rise in food prices. Tomato prices fell 31.09% in August, compared with a 4.60% decline in July, while potato inflation stood at -13.14%, narrowing from -16.56% in July. Lady’s finger prices declined 5.41%, almost unchanged from the 5.50% fall in July.
The inflation trajectory will remain closely tied to the progress of the southwest monsoon and the outlook for food production. While a normal monsoon can help improve crop output and contain food prices, uneven rainfall or weather disruptions could put pressure on prices of key agricultural commodities.
Global energy prices also remain an important risk for India, given its dependence on imported crude oil. A sustained rise in crude prices can feed into domestic fuel and transport costs, widen the current account deficit and put pressure on the rupee, potentially adding to imported inflation.
The inflation figures released on Monday are provisional and may be revised subsequently.
RBI sees inflation rising through FY27
RBI trimmed FY27 inflation forecast to 5% from 5.1% as crude prices, supply pressures eased.
The Reserve Bank of India’s Monetary Policy Committee (MPC) lowered its inflation forecast for FY27 to 5% at its August 5 meeting, from 5.1% projected in June, citing softer global crude oil prices and easing supply-side pressures.
The central bank revised its quarterly inflation projections as well. CPI inflation for Q1 was lowered to 4.1% from 4.2% earlier, while the forecast for Q2 was cut to 4.7% from 5.1%. The Q3 projection was retained at 5.9%, while the estimate for Q4 was raised marginally to 5.5% from 5.4%.
The RBI said risks to the inflation outlook remain evenly balanced and expects headline inflation to rise in the near term, peak in the third quarter and moderate thereafter.
The central bank also lowered its FY27 forecast for core inflation to 4.3% from 4.7% projected earlier.
“The realised inflation for the first quarter, however, was marginally lower than projections, reflecting limited pass-through of cost pressures. The higher inflation is largely on account of food and fuel prices, with little sign of generalisation of price pressures so far,” RBI Governor Sanjay Malhotra said.
He added that core inflation, excluding precious metals, continues to remain benign, adding that headline inflation is expected to rise further in the near term, driven primarily by food and fuel prices, before easing after peaking in Q3.
“As projected earlier, headline inflation is expected to rise further in the near term and is likely to peak in the third quarter of this year, primarily due to food and fuel prices, before moderating thereafter. The underlying inflation, reflected in core inflation excluding precious metals, which has remained benign for some time, is expected to align with overall core inflation towards the end of the financial year.”
Malhotra had last month reiterated that containing inflation and maintaining price stability remained the central bank’s foremost priority, while leaving room to support economic growth where possible.
“Our primary mandate is inflation and price stability. Therefore, we will do whatever is required first to keep price stability and then, to see to what extent we can support growth,” he added.
