Indian households are grappling with a significant resurgence in food inflation, largely fueled by a sharp increase in the prices of onions and other essential vegetables. A recent report by Acuite Ratings & Research highlights that adverse weather conditions, including intense heatwaves and an uneven monsoon, are the primary culprits behind these escalating costs, threatening to strain household budgets further in the coming months.
Weather Woes Drive Vegetable Price Surge
Vegetables have recorded the most substantial price increases among food items, with onions experiencing the steepest jump. According to Acuite's July 2026 Macro Pulse report, onion prices alone surged by nearly 25% between June and July 2026. This dramatic rise reflects severe supply disruptions caused by prolonged summer heatwaves, exacerbated by El Niño conditions and below-normal rainfall across key agricultural regions.
The report notes that wholesale food inflation has accelerated more rapidly than retail inflation, signaling a buildup of cost pressures throughout the supply chain. These pressures are expected to gradually transfer to consumers, maintaining upward momentum on food prices.
Monsoon Deficiency Raises Supply Concerns
The southwest monsoon's erratic performance is identified as a critical risk to India's inflation outlook. As of July 20, cumulative monsoon rainfall was 23% below the long-period average (LPA). The India Meteorological Department (IMD) forecasts an overall 10% rainfall deficiency for the season. Southern and northeastern India, in particular, have experienced significant rainfall shortages, escalating the risk of reduced agricultural output.
Further compounding the issue, rainfall distribution has been highly uneven, with nearly 60% of India's districts receiving deficient or largely deficient rainfall. While kharif sowing has seen some recent improvement, narrowing its shortfall from 16% to 6% by mid-July, reservoir levels remain among the lowest recorded in recent years. These factors collectively indicate widespread agricultural production risks.
Inflation Expected to Remain Elevated
Reflecting these persistent risks, Acuite Ratings & Research has maintained its FY27 consumer price inflation (CPI) forecast at 5.1%, which is above the Reserve Bank of India's medium-term target of 4%. The firm anticipates inflation will remain under pressure due to a combination of deficient monsoon, hardening food prices, higher energy costs, and the delayed pass-through of imported input costs resulting from rupee depreciation. Acuite projects Brent crude oil prices to average USD 80-85 per barrel during FY27.
Headline CPI inflation already rose to 4.3% in June 2026, marking an 18-month high, predominantly driven by food inflation. Although transportation inflation also increased due to earlier fuel price hikes, core inflation remained relatively stable at 3.9%. Household inflation expectations have also risen, suggesting consumers anticipate further price increases in the coming months, positioning inflation as a key macroeconomic risk for the second half of FY27.