India: Inflation risks tilt higher – Societe Generale

Societe Generale economist Kunal Kundu notes that India’s headline Consumer Price Index (CPI) inflation rose to 4.8% year-on-year in August 2026, staying above the Reserve Bank of India ’s (RBI) 4.0% median target for a third month. Kundu highlights that food remains the main driver, but core goods and services inflation are also firming, suggesting broader underlying pressures and a less comfortable inflation mix for RBI policy.

Broader price pressures challenge RBI

"India’s headline CPI inflation rose sharply to 4.8% yoy in August 2026, in line with our forecast, from 4.5% in July. This marked the third consecutive month in which inflation remained above the RBI’s median inflation target."

"Although food prices continued to account for much of the increase, the August print points to a more consequential shift in the inflation landscape: price pressures are gradually becoming broader based, with both core goods and services inflation gaining momentum."

"Given the large weight of food in the CPI basket, its renewed acceleration is likely to keep headline inflation elevated in the near term, even if price pressures across individual categories do not intensify further."

"Unless sequential momentum softens meaningfully, the balance of inflation risks is likely to remain tilted to the upside."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)