NEW DELHI: After touching a seven-month high in October, retail inflation could rise further this month on the back of higher vegetable and oil prices. According to experts, it could cross the 4 per cent mark in November. Most global financial services majors — Nomura, BofAML and Morgan Stanley – have forecast price pressures to build up in the coming months following a cyclical recover in the economy and rise in vegetable and oil prices.
“We expect CPI inflation to rise above 4 per cent in November and stay above the RBI’s target of 4 per cent through 2018,” Nomura said in a research note. Stronger food and fuel inflation pushed up headline CPI inflation in October to a seven-month high of 3.58 per cent.
According to BofAML, November CPI inflation is likely to be around 4.5 per cent. It also noted that inflation could be brought under control if the government takes proactive steps like importing onions and containing hoarding.
Since June, retail inflation has been rising consistently amid a slowdown in factory output, measured by Index of Industrial Production (IIP).
Morgan Stanley economists say that apart from the rise in food and oil prices, further implementation of HRA-related hikes by more states and across sectors will also fuel inflationary pressures.
“In the near term, upside risks to inflation could arise due to a further rise in global oil prices, whereas recently announced cut in GST rates for most mass consumption items could provide some respite,” the global brokerage firm said in a report.
Keeping prices under control is a priority for the government too, because retail inflation is one of the data points that the Reserve Bank of India (RBI) considers before deciding on whether to cut key rates.
In the October 4 policy review, RBI had kept benchmark interest rate unchanged on fears of rising inflation.