Flight tickets, food and more: 5 charts that explain what’s driving inflation higher, wider

In October, household prices in India rose by more than 6% compared to the same month a year ago, marking the first time this has occurred in two years. This 6% figure is crucial as it is the maximum limit allowed by law for the Reserve Bank of India (RBI) when measuring inflation. If average inflation remains above 6% or below 2% for three consecutive quarters, the central bank is considered to have failed in achieving its mandate.

Economists are concerned that inflation may continue to exceed 6% until June 2027. One major driver of this inflation surge is the skyrocketing cost of air travel. In October, average airfares soared by 43% compared to the previous year, with the largest increase among all goods and services in the Consumer Price Index (CPI) basket.

In fact, airfares alone saw a 13.36% price hike from the previous month. The issue has even reached the Supreme Court, with an application seeking a cap on airfares during the festival season. However, the court declined to grant an urgent hearing, advising people not to travel by air. Another significant factor contributing to inflation is the soaring price of memory chips, also known as "chipflation."

This is impacting the manufacturing of consumer electronics, resulting in a 22% increase in pen drive costs, a 9% rise in phone and laptop prices, and a 4-5% increase in other major electronic appliances. With the global chip shortage expected to persist for several more years, this trend is likely to continue. Food inflation has also risen sharply, reaching 8.94% in October.

For households, this means higher costs for both cooking at home and dining out, as cooking gas prices have increased as well. Gaura Sen Gupta, Chief Economist at IDFC FIRST Bank, attributes the surge in food prices to a weak monsoon season and the upcoming festival season. While food and fuel prices can fluctuate significantly from one month to the next, the underlying price pressures are also evident in core inflation.

This measure excludes volatile food and fuel prices and shows that core inflation is on the rise as well. The RBI had previously predicted that core inflation will average 4.4% in 2026-27, but the actual figure for the first seven months of the fiscal year is already at 4.5%, bringing the average to 3.9%. Moreover, the surge in inflation is not limited to a few items but is spreading to more goods and services within the CPI basket.

A staggering 95 out of the 358 items in the consumption basket recorded 6% or higher inflation in October, compared to just 40 items in January. This widening trend has further concerns for policymakers, as it suggests that price pressures could increasingly impact a broader range of consumer goods and services.