Indian households expect 10% inflation while the RBI forecasts 5.2%

Economy No. 62 11 October 2026 · 3 min read

On 7 October 2026, the RBI raised the repo rate by 25 bps to 5.50%. It also released a survey showing what households expect prices to do. The median household across 19 cities expects inflation to reach 10% over the next year, up from 9.4% in July. They estimate inflation today at 8.4%.

Official numbers are much lower. CPI inflation stood at 4.8% in August, and the RBI expects it to average 5.2% in 2026-27. Households have historically expected higher inflation than official figures, possibly because their answers reflect the prices they personally pay. So the 10% figure itself is not unusual.

What matters is that expectations are rising again. Households expected 8% inflation in November 2025, the lowest since July 2019. The figure has increased in every survey since, reaching 10% for the first time since January 2025. Meanwhile, 59% expect prices to rise faster over the next 3 months, up from 57.1%, and 84.9% expect food prices to increase.

Another RBI survey found that 54.5% of urban households think the economy is worse than a year ago, up from 40.9% in September 2025. This is the highest since November 2022. Yet 83.7% say they are spending more than a year ago, the highest since June 2018. That does not necessarily mean they are buying more. When prices rise, households spend more money just to buy the same things.

The RBI worries that rising inflation expectations can make inflation harder to control. If people expect prices to rise by 10%, they may demand higher salaries, while businesses may raise prices in anticipation of higher costs. This can create a cycle where expectations of inflation end up pushing inflation higher.

The 10% figure is not a prediction of where inflation will actually land. It measures what households expect, based on their own experience. But those expectations have worsened for 10 months, and the RBI is now raising interest rates partly to prevent them from feeding into actual inflation.

City households now tell the RBI they expect 10% inflation. What households in 19 cities told the RBI, by survey round: inflation felt now, expected in 3 months and in a year. The year-ahead figure has risen 5 rounds in a row.

More city households tell the RBI the economy has worsened

Share of urban households who told the RBI the economy is better, the same or worse than a year ago, by survey round. The share saying worse rose from 40.9% to 54.5% in a year.

% OF URBAN HOUSEHOLDS

WorseSameBetter

The question asks how the general economic situation compares with a year ago: improved, remained the same or worsened. The September 2026 round took 6,054 answers in 19 cities between 10 and 20 September.

RBI, Urban Consumer Confidence Survey, September 2026 round · Sep 2025 to Sep 2026

84.9 of every 100 city households expect food prices to rise. Of every 100 households in 19 cities, how many expect each kind of price to rise in the next 3 months, September 2026. Food leads, and even the lowest, household durables, is 69.6 of 100.

Sources