India’s Inflation Climbs to 5.54% in September, Above Estimate

India’s consumer-price inflation rose to 5.54% in September from 4.82% in August, exceeding the 5.40% estimate and reaching its highest level in 22 months.

Inflation has risen for 11 straight months, moving further above the Reserve Bank of India’s (RBI) 4% medium-term target. The increase adds pressure on policymakers to maintain tight monetary conditions as price growth accelerates in India’s economy.

The RBI raised interest rates earlier this month for the first time since 2023. It said further rate cuts were off the table in the near term, leaving a rate increase or a pause as the possible next policy actions.

The central bank projects headline inflation at 5.2% for the financial year ending in March 2027, with core inflation at 4.4%. It also raised its economic growth estimate by 40 basis points to 7.1%.

India imports nearly 85% of its fuel needs, leaving it vulnerable to energy-supply disruptions. Elevated oil prices and ongoing geopolitical tensions are adding to inflation risks.

The RBI warned that prolonged geopolitical tensions, trade frictions, tighter financial conditions and elevated international commodity prices could weigh on economic activity. Food prices and the rural economy also face risks from exceptionally low rainfall during the June-to-September monsoon season.

The September result follows earlier expectations for inflation to reach 5.4%.