In September 2024, India’s Consumer Price Index (CPI) inflation picked up to 5.49% YoY from 3.65% YoY in the previous month. The increase in headline inflation was largely driven by a rise in food inflation to 8.4% YoY in September 2024 from 5.3% in August. Food inflation also remained broad-based, with 43% of items in the food basket witnessing inflation rates surpassing 6%.

Vegetables (CPI weight: 6.0%) remained the primary contributor to CPI inflation, accounting for ~43% of the headline figure. Prices of vegetables rose by 36% YoY, driven by a steep increase in the prices of onions and garlic, along with a muted correction in tomato prices.

Core inflation also increased to 3.6% YoY in September 2024 from 3.4% YoY in the previous month. Core inflation and its refined measures have bottomed out because of the revision in mobile tariffs and the increase in gold prices.

The 2024 monsoon season concluded with an 8% surplus in rainfall, supporting healthy kharif sowing and robust reservoir storage. All these factors bode well for the trajectory of food inflation. However, food prices may continue to impart volatility to headline inflation. We anticipate inflation to average around 4.5% YoY in FY25.

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