Onions, Ginger and Cooking Oil Get Costlier as Food Inflation Builds in India

Indian households are paying more for several everyday food items, with onions, ginger, cooking oil and dairy products among the staples becoming costlier. The rise comes as a weaker monsoon strains crop prospects, demand from ethanol production absorbs more grain and overseas conflicts add pressure to global food and fuel prices. 

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The increase is particularly significant for household budgets because food accounts for almost half of monthly spending for some rural families and nearly 40% in urban areas. 

August consumer price data shows onions were almost 50% more expensive than a year earlier, while ginger prices had risen more than 70%. Vegetable oil prices have also moved higher. 

Food now makes up more than a third of India’s retail inflation basket, and its steady rise has become an important part of the broader inflation picture. 

Monsoon shortfall puts crops under pressure 

The southwest monsoon has been weaker than usual this year. Rainfall since June is running 15% below normal, while September rains are also expected to remain below normal. 

The shortfall has been linked to El Niño, which is associated with drier conditions in India. 

Attention is now on the impact this could have on crops including rice, corn, soybeans and sugar cane. Planting of rice and corn is already running more than 3% behind last season. 

Sugar has faced its own supply concerns. Domestic prices rose sharply in August, prompting the government to permit a tranche of duty-free sugar imports. India is the world’s second-largest sugar producer. 

The relationship between rainfall and food prices can be substantial during weak monsoon years. The report cited an estimate that every percentage point by which rainfall falls short of normal corresponds to roughly a 25-basis-point increase in food inflation during deficient monsoon years. 

Ethanol demand adds another pressure point 

India’s biofuel programme has also changed the demand equation for some agricultural commodities. 

The country brought forward its 20% ethanol-blending target from 2030 to 2025, leading to a wider rollout across fuel stations. Corn and rice are being used as feedstocks alongside sugar cane. 

That creates another source of demand for crops that are also required for food and animal feed. Higher returns from ethanol producers could influence where farmers choose to sell their produce, potentially tightening supplies available for other uses. 

The impact is already visible further along the food chain. The report cited the example of a chicken and egg seller in Mumbai’s suburbs whose cost of feed for live birds doubled within a month. 

He raised chicken prices from ₹240 per kg to ₹260 and was considering an increase to ₹300 after the end of Shravan in Maharashtra. 

Milk and paneer have also become more expensive, according to Central Statistics Office data cited in the report. 

Global conflicts add to domestic cost pressures 

India’s food-price challenge is not entirely domestic. 

The conflicts involving Iran and Ukraine have pushed up crop and fuel prices globally. India also experienced shortages of liquefied petroleum gas used for cooking earlier this year because of the conflict in West Asia. 

For restaurants and other food businesses, that means higher costs can arrive from several directions at once — cooking fuel, ingredients and agricultural commodities. 

Passing those increases on to consumers is not always straightforward, particularly for smaller restaurants competing with lower-priced local food vendors. 

Festive demand arrives as prices remain elevated 

The timing is important because India’s festive season is beginning, with Diwali due in November. 

Food consumption typically rises during this period, particularly for sugar and cooking oil as households prepare sweets, fried foods and other festive dishes. This year, that seasonal demand is arriving after food inflation has already accelerated month after month. 

Broader inflation in August reached its highest level since December 2024 and remained above the Reserve Bank of India’s 4% medium-term target for a third consecutive month. 

The RBI has kept interest rates unchanged since the beginning of the year and has identified El Niño as a risk to food prices. The report noted that economists are increasingly seeing the possibility of an interest-rate increase as early as October. 

With the monsoon season approaching its end, the next crop harvests will be important for the direction of food prices. Until then, households are entering the festive months with several staples already costing considerably more than they did a year ago.