India's retail inflation may rise to 5.47% in September as food prices climb: UBI
Union Bank of India report warns of rising retail inflation driven by soaring vegetable and food prices, potentially exceeding RBI comfort levels.
India's retail inflation is poised for a significant jump in September, driven primarily by a massive surge in food costs. According to a recent report by the Union Bank of India (UBI), headline inflation is expected to climb to 5.47 per cent, up from the 4.82 per cent recorded in August.
Food Prices Drive Inflation Spike
The primary engine behind this inflationary pressure is the food sector. UBI estimates that food inflation will accelerate sharply to 7.35 per cent in September, compared to 5.66 per cent in August. This surge is expected to push headline inflation to its highest level since December 2024, placing it well above the comfort zone established by the Reserve Bank of India (RBI).
Vegetables have emerged as the most significant contributor to this upward trend. The report highlights a dramatic jump in vegetable inflation, which is estimated to have skyrocketed to 9.34 per cent in September, up from a mere 0.99 per cent in August. A major factor in this spike is the cost of onions, which reportedly rose by approximately 34 per cent during the month.
Wider Food Category Pressures
The inflationary pressure is not limited to vegetables; it is spreading across various essential food categories:
- Cereals: Expected to rise to 3.75 per cent from 2.82 per cent in August.
- Pulses: Projected to increase to 4.19 per cent from 3.06 per cent.
- Other Essentials: Prices for sugar, edible oils, and milk have also remained firm.
Supply Disruptions and Weather Concerns
Several complex factors are converging to drive these costs higher. The UBI report attributes the rise to prolonged supply disruptions, increased energy costs, and rising global chip prices. Furthermore, the potential impact of a "Super El Niño" is playing a critical role in destabilizing food supplies.
Weather patterns have already begun to show signs of strain. The southwest monsoon season concluded with rainfall 13 per cent below the long-period average. This has led to a noticeable drop in reservoir levels, which currently stand at 72 per cent, significantly lower than the 92 per cent recorded a year ago. These conditions have directly impacted agriculture, with total kharif crop sowing down by about 1 per cent and paddy sowing decreasing by nearly 3 per cent.
Core Inflation Shows Broad-Based Rise
Crucially, the price pressures are not confined solely to the volatile food sector. Core inflation—which excludes more volatile components—is expected to edge up to 4.48 per cent in September from 4.44 per cent in August. This indicates that supply shocks are increasingly feeding into the wider inflation basket, suggesting a more broad-based economic challenge that may persist in the coming months.