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.
India's headline Consumer Price Index (CPI) inflation climbed to 4.8% year-on-year in August 2026, staying above the Reserve Bank of India's (RBI) 4.0% median target for the third month in a row. Kunal Kundu, an economist at Societe Generale, attributes this rise to food prices, which continue to drive inflation, while core goods and services inflation is also accelerating.
Kundu notes that this broader shift in the inflation landscape suggests underlying pressures on the economy, making it less comfortable for RBI policy decisions. Despite food prices being a significant contributor, the latest data indicates that inflation pressures are becoming more widespread, affecting both core goods and services.
Given the substantial weight of food items in the CPI basket, elevated headline inflation is likely to persist in the near term, even if price pressures in individual categories do not intensify further. The RBI inflation risk remains tilted to the upside unless the pace of inflation acceleration slows significantly. Meanwhile, other factors such as US bond yields near multi-year highs, driven by oil prices and hawkish Federal Reserve rate-hike expectations, continue to support the US Dollar and weigh on the Indian Rupee.
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