The latest Consumer Price Index (CPI) figures, calculated using the revised 2024 base year, showed that inflation remained higher in rural areas than in cities. Rural inflation increased to 6.08% in September from 5.24% in August, while urban inflation rose to 4.88% from 4.31%.
Food inflation in rural India stood at 8.06%, compared with 7.18% in urban areas.
Onion prices surge 108%, ginger and garlic also costlier
Among individual items, onions recorded the steepest price increase, with inflation surging to 108.09% in September from 48.78% in August.
Silver jewellery recorded inflation of 87.80%, followed by ginger at 62.85%, garlic at 54.62% and lemons at 36.41%.
However, some vegetables continued to provide relief to consumers. Potato prices declined 11.50% year-on-year, while tomato prices fell 8.62%. Prices of lady's finger declined 4.48%, and coconut prices were down 3.99%.
Motor cars and jeeps also recorded a 4.51% decline in prices compared with September last year.
Beyond food, inflation in restaurants and accommodation services stood at 9.36% in September.
The broader personal care, social protection and miscellaneous goods and services category recorded inflation of 13.75%.
Transport inflation stood at 5.01%, while clothing and footwear inflation was 3.93%. Housing, water, electricity, gas and other fuels recorded inflation of 2.74%.
Health services recorded a relatively modest inflation rate of 1.40%, while education services inflation stood at 3.94%.
Which states recorded the highest inflation?
Among major states, Tamil Nadu recorded retail inflation of 6.81%, followed by Odisha at 6.70%, Madhya Pradesh at 6.68%, Telangana at 6.64% and Andhra Pradesh at 6.29%.
Uttar Pradesh recorded inflation of 6.08%, while Maharashtra reported 5.18%. Delhi's inflation stood considerably lower at 3.40%.
MoSPI said the next CPI release, covering October 2026, is scheduled for November 12.
ISB professor warns against artificially low interest rates
Earlier today, Indian School of Business (ISB) Professor Prasanna Tantri warned that the Reserve Bank of India's efforts to keep interest rates artificially low could add to inflationary pressures and undermine stability in the bond market.
"We have already lost $43 billion of the $143 billion in borrowed money raised under RBI guarantee to defend the rupee. Policymakers must recognize that last year's money printing through open market operations to keep interest rates artificially low is part of the problem," he said on X.
He added that blaming speculators and resorting to band-aid solutions cannot prevent inflationary pressures when broad money supply has reached nearly 90% of GDP, "a level last seen during COVID, and the RBI's balance sheet has also swelled substantially."
We have already lost $43 billion of the $143 billion in borrowed money raised under RBI guarantee to defend the rupee. Policymakers must recognize that last year's money printing through open market operations to keep interest rates artificially low is part of the problem. Blaming speculators and resorting to Band-Aid solutions cannot prevent inflationary pressures when broad money supply has reached nearly 90% of GDP, a level last seen during COVID, and the RBI's balance sheet has also swelled substantially. The 10-year government bond yield is already rising independently of RBI policy. We risk losing the stability in long-term yields achieved at great cost. If policymakers do not act now, they will be forced to act much more aggressively later. We cannot sustain zero real interest rates when much of the world offers positive real returns.
— Prasanna Tantri (@TantriPrasanna) October 12, 2026
The professor also pointed to rising yields on 10-year government bonds, warning that policymakers risked losing the stability in long-term borrowing costs achieved at considerable expense. "If policymakers do not act now, they will be forced to act much more aggressively later. We cannot sustain zero real interest rates when much of the world offers positive real returns," Tantri wrote.
The RBI raised its benchmark repo rate by 25 basis points to 5.50% on October 7. Tantri welcomed the move, but said the central bank was late.