Households’ inflation expectations rose in September, with median inflation expectations for the year ahead reaching 10 per cent from 8.6 per cent earlier in 2026, as consumer confidence weakened in both urban and rural India, according to the Reserve Bank of India’s (RBI’s) latest surveys. The three-month ahead inflation expectation climbed from 7.9 per cent to 9.9 per cent over the same period.
The RBI’s bi-monthly Households’ Inflation Expectations Survey showed that inflation expectations have been moving higher through most of 2026. Households’ perception of current inflation also rose, with the median increasing to 8.4 per cent from 7.8 per cent in July.
Median inflation expectation reflects what surveyed households believe inflation is or will be. It is different from the headline Consumer Price Index (CPI) inflation, which measures the actual change in prices of a weighted basket of goods and services.
The RBI’s consumer confidence surveys showed households becoming more worried about the economy, jobs and prices. Sentiment, however, remained positive on income and spending despite concerns about economic conditions, employment and prices.
The increase in inflation expectations was also visible across different categories of goods and services. For the three months ahead, 68 per cent of respondents said their expectations for food prices were in line with their expectations for general inflation. The corresponding figures were 68.1 per cent for non-food items and 68.7 per cent for services.
For the year ahead, the proportions were higher at 75 per cent for food, 73.9 per cent for non-food items and 76.5 per cent for services.
Urban consumers more worried about economy
The RBI’s survey of urban consumers showed that confidence weakened slightly in September. The Current Situation Index (CSI), which measures how consumers view their current situation, fell to 87.9 from 88.3 in July.
Expectations about the year ahead also softened, with the Future Expectations Index (FEI) falling to 113.5 from 115.3. It remained above 100, however, indicating that consumers continued to be optimistic about the year ahead.
The RBI calculates the FEI from consumers’ expectations about five things: the economic situation, employment, prices, income and spending. A reading above 100 indicates optimism, while one below 100 signals pessimism.
Consumers were particularly less positive about the economy. The net response on the current economic situation fell to -29.3 in September from -23.4 in July.
Views about the economy a year from now also became less positive. The corresponding reading fell to 7.8 from 11.1.
Jobs remained another concern. Consumers were still negative about the current employment situation, with the net response at -21.6. Their expectations about jobs a year from now also weakened. The one-year-ahead reading fell to 11.7 from 15.1.
Prices were an even bigger worry. The survey showed that consumers continued to feel that prices had risen sharply, with the reading on current prices worsening to -94.6 from -92.7 in July.
Spending, however, remained resilient. The reading on current spending actually improved to 81.1 from 77.3. While the net response for essential spending remained high, at 88.4, the reading for non-essential spending was only 4.6.
Rural confidence under greater pressure
The rural survey showed a more pronounced weakening in current sentiment. The rural CSI fell to 90.6 in September from 91.7 in July, extending its decline for a sixth consecutive survey round. The FEI also eased, to 112.8 from 113.6, but remained in the optimistic zone.
Rural households were also less positive about the economy, employment and their own income. The net response on the current economic situation fell to -14.1 from -11.9, while the employment reading declined to -10.5 from -8.0.
Price concerns also increased. Median inflation perceived by rural households rose 70 basis points to 6.8 per cent, while their one-year-ahead inflation expectation rose 50 basis points to 7.9 per cent.
Spending, however, again moved in the opposite direction. The net response on current spending rose to 79.6, while the one-year-ahead reading increased to 78.4. The net response for essential spending stood at 84.2, compared with 39.3 for non-essential spending.
RBI’s inflation forecast
Retail inflation, measured by the Consumer Price Index (CPI), was 4.82 per cent in August. CPI tracks changes in the prices of goods and services that households typically buy. The RBI expects CPI inflation to average 5.2 per cent in 2026-27, with inflation projected to rise to 6 per cent in the December quarter before easing to 5.7 per cent in the March quarter.
