Union Bank of India has predicted a notable rise in food inflation, expecting it to reach 7.35% due to surging prices of vegetables and onions, ongoing supply disruptions, and below-average rainfall from the monsoon season.
According to a recent report by Union Bank of India (UBI), India’s retail inflation is anticipated to increase to 5.47% in September 2026, up from 4.82% in August. This upturn in inflation would mark the highest level since December 2024 and exceed the Reserve Bank of India’s (RBI) medium-term target of 4%.
The hike in food inflation is mainly attributed to a sharp rise in the prices of vegetables, which are predicted to see inflation jump from just 0.99% in August to 9.34% in September. The prices of onions have soared by approximately 34% in September alone, as reported by the Department of Consumer Affairs. Additionally, other food items like cereals, pulses, sugar, edible oils, and milk are also facing inflationary pressures.
UBI explained that the anticipated rise in inflation is due to prolonged supply issues, increased energy costs, higher prices for global chips, and the potential impact of a strong El Niño weather phenomenon. The southwest monsoon ended the June-September 2026 season with rainfall 13% below the expected average, leading to lower reservoir levels, which now stand at 72% compared to 92% the previous year. These conditions could exacerbate challenges in agricultural supply.
Sowing of total kharif crops has declined by about 1% compared to last year, and the sowing of paddy has decreased nearly 3%. The report highlighted that food inflation rose from 2.12% in January 2026 to 5.66% in August, demonstrating ongoing price pressures despite a favorable comparison to the previous year.
In addition to food inflation, core inflation, which excludes volatile items, is also on the rise, anticipated to reach 4.48% in September, up from 4.44% in August. This broad-based increase in prices indicates that supply chain disruptions and rising input costs are affecting the overall inflation landscape.
The inflation forecast will remain closely tied to food supply conditions, energy prices, and weather patterns in the upcoming months. Policymakers will closely monitor these factors to understand their impact on household purchasing power and to shape monetary policy effectively.
