Inflation at 5.54%: onions up 108%, and the restaurant bill up 9%

A year ago, Indian inflation was falling toward a record low. In September 2026, it was 5.54%, up from 4.83% in August, the highest reading of the year and the fourth straight month above the RBI’s 4% target. Food inflation jumped to 7.74% from 5.97%. The single most dramatic number in the release was onions, up more than 108% on a year earlier.

Why onions, and why not tomatoes

Onions are grown largely in a few states, stored for months and highly sensitive to rainfall. The weak monsoon cut this year’s crop and storage stocks at the same time. Tomatoes and potatoes, by contrast, were still cheaper than a year ago, partly because last year’s prices for them were high. That is a base effect working in the other direction, and it is a good reminder that headline food inflation is an average of very different stories.

Eating out got expensive

Restaurant and accommodation prices rose 9.36%. Restaurants faced both expensive food and expensive commercial gas this year, and they have been passing those costs to customers. This is part of core inflation, the services and goods that exclude raw food and fuel, and it is what central banks watch most closely, because price increases in services tend to stick.

Rural India feels it more

Rural inflation was 6.08% against 4.88% in cities, and rural food inflation was 8.06%. Rural households spend a larger share of their budgets on food, so food price spikes hit them harder, and this year the same weak monsoon that raised their costs also cut their farm incomes. The September data arrived five days after the RBI’s first rate hike since 2023. It made clear why the RBI acted, and suggested the December meeting will not be the last time inflation decides the outcome.