Onion shock hits India, inflation rises; Kerala feels pinch but fares better in South

Kerala’s retail inflation rose to 5.26 per cent in September from 4.67 per cent in August, mirroring a broader increase in price pressures across the country. Soaring onion and other food prices pushed India’s inflation rate to 5.54 per cent in September.

Although Kerala has stayed out of the country’s five highest-inflation states since March, the steady rise in prices could pose a challenge for the V D Satheesan government. The state had topped the national inflation chart for 12 consecutive months from January to December 2025 before slipping to second place in January and third in February this year.

Kerala’s September inflation rate was lower than those of its southern neighbours, making it the state with the lowest inflation in South India. Tamil Nadu recorded 6.81 per cent, Telangana 6.64 per cent, Andhra Pradesh 6.29 per cent and Karnataka 5.86 per cent. The rate was 6.86 per cent in Puducherry and 3.95 per cent in Lakshadweep.

In Kerala, inflation stood at 5.61 per cent in rural areas and 4.97 per cent in urban areas in September.

At the national level, retail inflation, measured by the Consumer Price Index (CPI), rose to 5.54 per cent in September from 4.83 per cent in August. Food inflation accelerated to 7.74 per cent from 5.97 per cent in the previous month, according to data released by the National Statistics Office (NSO).

Onion prices recorded the sharpest increase among the major items, with inflation touching 108.09 per cent. Silver jewellery came next at 87.8 per cent, followed by ginger at 62.85 per cent, garlic at 54.62 per cent and lemon at 36.41 per cent.

Inflation remained negative for potatoes, tomatoes, motor cars and jeeps, lady’s fingers and coconuts.

September’s headline inflation rate was the highest recorded since the new CPI series, with 2024 as its base year, was introduced in January.

Tamil Nadu tops state inflation chart
Tamil Nadu recorded the highest inflation among states at 6.81 per cent, followed by Odisha, Madhya Pradesh, Telangana and Andhra Pradesh. Mizoram registered the lowest rate among states, the NSO data showed.

The rise in inflation comes amid growing concerns over price pressures. The Reserve Bank of India (RBI) has raised its retail inflation forecast for the current financial year to 5.2 per cent from its earlier estimate of 5 per cent, citing increasing price pressures across commodities.

For 2026-27, the RBI has projected inflation at 5.2 per cent, with rates of 4.9 per cent in the second quarter, 6 per cent in the third quarter and 5.7 per cent in the fourth quarter.

The government has mandated the central bank to maintain inflation at 4 per cent, with a tolerance band of two percentage points on either side, or between 2 per cent and 6 per cent.

Rising inflation, a weakening rupee and high crude oil prices have added to concerns over the economic outlook, with the RBI signalling caution on the prospect of monetary easing.