Festive season may pinch as food inflation threatens to stay elevated

Representative image for Kharif sowing Sanjeeb Mukherjee New Delhi 8 min read Last Updated : Sep 08 2026 | 9:57 PM IST India's festive season starts on September 14 with Ganesh Chaturthi, the first major pan-India celebration that kickstarts at least three months of festivities, most of which involve a significant amount of gastronomical excess. This year, though, consumers may be in for a bit of sticker shock, as food inflations threatens to stay elevated through the second half of the financial year. What's more worrying is that the higher food price trend is not limited to India. Last week, the United Nation's Food and Agricultural Organisation or FAO's monthly global food price tracker rose to its highest level since 2022 in August 2026, largely on account of impending El Nino-induced shortages and continuing supply disruptions due to the West Asia war. The FAO Food Price Index, which tracks monthly changes in a basket of internationally traded ??food commodities, averaged 133.3 points in August 2026, up from July's revised reading of 130.8. The August reading is the highest since November 2022, but still nearly 17 per cent below a record high in March 2022, following Russia's full-scale invasion of Ukraine. FAO chief economist Maximo Torero said in a statement that August's increase in global food prices is a warning that risk premium is returning to food markets: climate shock, geopolitical tensions, and disrupted trade logistics are converging to tighten supply expectations. The trend could get worse given that El Nino is projected to enter its strongest phase starting September-October. In India, too, food prices have started showing a distinct upward tick over the last few weeks, driven by concerns over final kharif output as well as an uneven southwest monsoon in 2026. Aditi Nayyar, chief economist at Icra, pointed out that sub-par monsoon rains have impacted the sowing of some kharif crops and have also led to reservoir levels lagging historical averages. "(This) may eventually weigh on rabi sowing and output. Overall, this is likely to exert an upward pressure on food prices in H2FY2027," she said. While the rains recovered to some degree in July and August after a poor showing in June, long breaks in rainfall in some parts have kept the overall shortfall at close to 14 per cent so far, with regional variations in rainfall volumes ranging from 0-35 per cent. Kharif sowing, which had been lagging until June end, picked up pace in July and August. Acreage of all crops through August was around only 1.7 per cent lower than last year and 3 per cent less than the average of the past five years. Harsh Vardhan Bhagchandka, President, IPL Biologicals said the kharif season has seen a meaningful recovery over the past few weeks, with the sowing gap versus last year narrowing to around 2 percent by mid-August as the monsoon gained momentum. 'The improvement is encouraging, particularly as acreage under pulses, oilseeds and cotton has moved much closer to last year's levels. However, rice acreage continues to remain below the previous year, and the recovery has not been uniform across crops or regions,' Bhagchandka said. At a granular level, data showed that till August 28, acreage under urad, cotton, and soybean was significantly lower than in the preceding five years. Those three crops are actually where the real impact of inflation could show up in the coming months; of course, the weather - specifically, El Nino - will have an outsize role in that matrix. According to Bhagchandka, though, the recovery in sowing only changes the nature of the concern rather than eliminating it. The question is no longer simply how much area has been sown, but how well pulses, oilseeds, and cotton perform through the remainder of the season. 'A late-sown crop can still face consequences if its critical growth and reproductive stages coincide with periods of inadequate soil moisture, excessive rainfall or other weather stress. Therefore, acreage recovery is certainly positive, but it should not by itself be interpreted as a guarantee of a comparable harvest,' he said. He added that the revival in rainfall has provided an opportunity for farmers to stabilise crop establishment and recover some of the yield potential that appeared to be at risk earlier in the season. Nonetheless, cumulative monsoon rainfall remains below normal, which means the distribution and continuity of rainfall through the remaining crop cycle will be critical. 'From an agricultural industry perspective, this is where the focus must now shift from acreage to crop health, soil moisture, and nutrient-use efficiency. Farmers will need to manage their crops carefully through the flowering, pod formation, and grain-filling stages, particularly in areas that experienced delayed sowing or uneven rainfall,' Bhagchandka said. He said the focus now must move from how much has been sown to how well the crop is able to convert that acreage into yield. On the inflation front, early indications of kharif crops show that prices of most were ruling over their respective MSPs which should augur well for the farmers. Consumers, though, could feel some pain going into the festival season. Data from the Ministry of Consumer Affairs shows that the retail price of a kilogramme of tur dal as on September 7, 2026 was around 9.07 per cent more than on the same date last year, while a kilo of urad dal was 7.77 per cent dearer. The retail price of 1 kg of groundnut oil on September 7, 2026 was almost 11.64 per cent more expensive than on the same date last year, while soybean oil was around 12 per cent costlier. Furthermore, rice prices were around 11.06 per cent higher on September 7, 2026, compared to the same date last year, while onion was almost twice as expensive - 93 per cent, to be exact - on September 7, 2026, compared to the same date last year. Sugar prices have climbed 4.92 per cent in July 2026 on an annual basis, compared to 4.61 per cent in January 2026. This was before the August spike when retail sugar prices touched an all-time high of almost Rs 70 per kg. Eggs inflation has risen from around 6.77 per cent in January 2026 to 12.49 per cent in July 2026, while onion has jumped from negative 29.3 per cent in January this year to almost 22.54 per cent in July. Overall, data sourced from the Ministry of Statistics and Programme Implementation (Mospi) showed that food inflation has gone from a low of around 2.13 per cent in January 2026 to 5.52 per cent in July 2026. If September trends are any indicator, prices are unlikely to cool in the next month, either. And elevated global prices means that imports won't be any cheaper. Madan Sabnavis, chief economist at Bank of Baroda, said it would be difficult to assess the kharif crop outlook until the harvest begins. However, the delayed sowing of several crops, particularly cereals, is likely to push back harvesting in many areas. 'For single-season crops, this could create an upward pressure on prices as existing stocks will have to meet demand for a longer period until the fresh crop arrives. So, overall, there is likely to be a tendency for prices to rise rather than decline, at least for these crops,' Sabnavis said. He said prices of vegetables and fruits would remain more seasonal and volatile, depending on crop-specific developments. Government measures such as releasing stocks could help contain the extent of price increases, but would not necessarily bring prices down. 'Ultimately, we will have to wait for the fresh crop to arrive, which is likely to happen around October-November,' he said. On the outlook for food inflation during Diwali, Sabnavis said consumers could face higher food prices, with food inflation likely to be around 5.5-6 per cent in the coming months. 'Going into October, prices are likely to remain elevated and, conservatively speaking, food inflation of around 5.5-6 per cent looks very much on the cards,' he said. The recent surge in sugar prices is expected to materially harden the inflation prints for the sugar, confectionary and desserts segment in the near term, Nayyar said, adding that inflation in select items such as edible oils and eggs is also likely to remain elevated over the next few months. "While retail inflation in the food and beverages segment is projected to inch up slightly to about 5.4 per cent in August 2026 from 5.2 per cent in July 2026, it is set to escalate sharply thereafter, crossing the 7.0 per cent-mark in October 2026," noted Nayyar. "This hardening is partially expected to be driven by a low base across some food segments such as vegetables and pulses, as well as some packaged food items, with the latter largely stemming from the impact of the GST rate cuts in September 2025." With EL Nino threatening to dominate for the next few months, it remains to seen whether food prices climb down around Diwali or whether elevated levels push down some of the festive cheer.