India Retail Inflation At 14-Month High: India’s retail inflation surged to a 14-month high of 6.21 percent in October, driven by significant increases in food prices, especially vegetables, fruits, and edible oils, according to data from the National Statistical Office (NSO). This rise, marking a second consecutive month above the Reserve Bank of India’s (RBI) target range of 4 percent (+/- 2 percent), dampens expectations for a repo rate cut in the upcoming monetary policy review in December.
Sharp Increase in Food Inflation
The Consumer Price Index (Combined) reveals that food inflation reached 10.87 percent in October, the highest in 15 months, from 9.24 percent in September.
This surge pushed overall inflation up, with vegetables alone recording a 42.18 percent increase, up from 35.99 percent the previous month. Prices of fruits, cereals, meat, and fish also saw steady increases, with edible oils experiencing the sharpest rise, moving from 2.47 percent inflation in September to 9.51 percent in October. This is attributed to global price hikes and increased customs duties on edible oils, highlighting the impact of imported inflation on India’s economy.
Inflation in Rural vs Urban Areas
The October data shows a notable split between rural and urban inflation rates, with rural inflation at 6.68 percent, up from 5.87 percent in September, and urban inflation climbing to 5.62 percent from 5.05 percent. Food inflation was particularly pronounced in urban areas, hitting 11.09 percent, compared to 10.69 percent in rural regions.
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With inflation trending above target, the Reserve Bank of India has signaled a cautious approach. Last week, RBI Governor Shaktikanta Das reiterated that the recent policy stance shift from “withdrawal of accommodation” to “neutral” should not be seen as a precursor to rate cuts. “We have to be very cautious in our future course of action. A change in stance doesn’t mean that the next step is a rate cut,” Das stated. The repo rate has held steady at 6.5 percent for 20 months, and the current inflation surge further dims hopes for an immediate easing of rates.
Sector-Specific Inflation
Other categories also saw inflationary pressures. The services sector, indicated by the miscellaneous category, recorded a 4.32 percent rise in October, with personal care items climbing to 10.99 percent from 9 percent in September.
Economists, including CareEdge Ratings’ Chief Economist Rajani Sinha, caution that sustained high food inflation could impact household expectations and purchasing power, pressing the government to implement supply-side measures to stabilize prices. Factors like unseasonal rains and the extended monsoon season have aggravated the spike in vegetable prices, particularly for tomatoes and onions.
Outlook and Policy Implications
This inflationary spike highlights the ongoing challenges in maintaining price stability amid global supply chain issues, currency fluctuations, and adverse weather patterns. As inflation remains above the RBI’s target range, households and businesses may face continued price pressures. With the RBI’s cautious stance, the economic focus remains on balancing inflation control with the need to support growth.
