India's retail inflation rose to 6.09 per cent in October, breaching the Reserve Bank of India's upper tolerance limit of 6 per cent for the first time under the new consumer price series, as surging food prices pushed up household costs.

Data released by the Ministry of Statistics and Programme Implementation on Thursday showed the Consumer Price Index (CPI) climbing from 5.54 per cent in September — a 55-basis-point jump that took inflation to its highest level since October 2024. Economists polled by Reuters had expected a smaller rise, to 5.93 per cent.

Food prices lead the surge

The acceleration was driven largely by food, which accounts for nearly 40 per cent of India's consumer price index. Food inflation rose to 8.94 per cent in October from 7.74 per cent in September, as prices of staples such as onions, garlic and ginger climbed. Transport inflation also quickened, to 5.84 per cent from 5.01 per cent a month earlier.

Headline inflation has now remained above the Reserve Bank's 4 per cent medium-term target for five consecutive months. The last time it crossed the 6 per cent ceiling was in October 2024, when it reached 6.2 per cent under the previous CPI series, which used 2012 as its base year. The current series uses 2024 as the base.

Pressure on interest rates

The reading strengthens the case for further interest-rate increases. The RBI raised its benchmark repo rate by 25 basis points to 5.50 per cent at its October policy review — its first increase in nearly four years — citing elevated inflation expectations and broadening price pressures, and shifted its stance to calibrated tightening.

Minutes of the rate-setting committee's meeting indicated that further hikes may be needed to contain inflation, though policymakers stopped short of endorsing an aggressive tightening cycle, citing risks to economic growth. The next meeting of the Monetary Policy Committee is scheduled for December 2–4.

The central bank now expects inflation to average 6 per cent in the October–December quarter and has raised its forecast for the current financial year to 5.2 per cent, from 5 per cent earlier.

What could ease — or worsen — the picture

RBI Governor Sanjay Malhotra has warned that a weak monsoon and strong El Niño conditions pose risks to agriculture and rural demand, although ample foodgrain stocks and government measures are expected to cushion the impact. Brent crude futures, meanwhile, have fallen to around $92 a barrel, offering some relief to the inflation outlook.

For households, the October numbers mean the cost of the monthly food basket is rising at its fastest pace in two years — and with the central bank's tolerance band now breached, borrowing costs are unlikely to come down soon. The next inflation reading, for November, is scheduled for release on December 14.