Onions are up 108%. Why India's inflation just jumped to 5.54%

The headline says inflation is 5.54%. Underneath that number, one vegetable that makes up less than 1% of what Indians buy did about a seventh of the work. Here's what the September data shows when you take it apart.

Nine months of climbing

This didn't happen overnight. Under the new CPI series, inflation has risen every single month of 2026, from 2.74% in January to 5.54% in September. September was the fourth month in a row above the RBI's 4% target, and it came in above the 5.4% that economists polled by Reuters had expected.

Where the 5.54% actually comes from

Each spending group's contribution to inflation is roughly its weight in the basket multiplied by its own inflation rate. Run that maths on September's official numbers and the pieces add up to about 5.51%, very close to the published 5.54%.

Food and beverages make up 36.75% of the basket but delivered about 2.7 points, nearly half of all inflation. The surprise is in second place: personal care and miscellaneous goods, up 13.75%, mostly because of jewellery. "Other personal effects" rose 38.69%. Eating out is getting pricier too, with restaurant and hotel inflation at 9.36%.

Meanwhile housing and fuel, the second-biggest group at 17.67% of the basket, rose just 2.74%. That's what is holding the headline number down.

Small weight, big punch

In the new series, onion has a weight of just 0.70%. But when the price of something doubles, even a small weight matters. At 108% inflation, onions alone contributed roughly 0.75 of a percentage point, about 14% of all inflation in September.

The jump from August is even more striking. Onion inflation went from 48.78% to 108.09%, which on its own adds about 0.4 points. Headline inflation rose 0.71 points in the month, so onions explain more than half of the increase.

Silver jewellery, at just 0.31% of the basket, rose 87.8% and added roughly another quarter of a point.

Why villages are hit harder

Rural and urban households don't buy the same things, and the CPI weights show it.

Food is 42% of the rural basket but only 30% of the urban one. Housing, where prices barely moved, is a quarter of the urban basket. So when food spikes and rents don't, villages take the hit while cities get a cushion. Rural food inflation hit 8.06% in September, against 7.18% in cities.

That's also why Delhi, at 3.40%, looks so different from Tamil Nadu at 6.81%. Four large states are already above the RBI's 6% limit.

What's behind it, beyond onions

• WeatherAnalysts point to below-normal rainfall this monsoon and an El Niño that Emkay Global's Madhavi Arora says may persist into 2027.
• OilHigher crude prices tied to the Iran war. DBS Bank's Radhika Rao expects fuel costs to push up non-food prices with a lag.
• Base effectInflation a year ago was unusually low. In September 2025 it was 1.54% on the old series, a 99-month low, so this year's comparison looks steeper.
• CoreICRA estimates core inflation, which excludes food and fuel, at about 4.6%. Price pressure is spreading, but not yet runaway.

What forecasters now expect

• HDFC BankNext print near 6%, full-year inflation 5.4%, a 25 bps hike in December. (Sakshi Gupta)
• KotakInflation above 6% over the next few months, another 50 bps of hikes. (Upasna Bhardwaj)
• EmkayOctober–December inflation averaging about 6.1%, hikes in December and February. (Madhavi Arora)
• IDFC FirstRepo rate peaking at 6.0–6.25%, up from 5.50% today. (Gaura Sengupta)

Dates to watch

• 12 NovOctober inflation. If forecasters are right, it could touch 6%.
• 2–4 DecRBI policy meeting. Most economists quoted above expect another hike.

September figures are provisional. Contribution figures are FIN2DAY approximations from official weights, not official statistics.