NEW DELHI: Retail inflation reached a four-month low of 4.87% in October, primarily driven by a decrease in core and fuel inflation, as per the government data.
In September, the Consumer Price Index (CPI) based retail inflation had dropped to a three-month low of 5.02%. The Reserve Bank of India’s Monetary Policy Committee (MPC) projected inflation at 5.4% for fiscal year 2023-24, down from 6.7% in the last fiscal. Overall food inflation remained unchanged despite underlying mixed trend. A base that turns adverse (inflation had seen a drop in the year-ago period) will somewhat restrict the downside to inflation for two months.
Food inflation rate exhibited a mixed trend, with oil and fat prices seeing a fall of 14%, while pulse prices saw a rise of 19%. Cereal prices continue to show double-digit inflation with an 11% year-on-year (YoY) growth. Vegetable prices, which usually cause sharp change in retail inflation, remained stable with 2.7% rise YoY. Though month-on-month, vegetable prices rose 3.38%. Fuel and lights inflation fell 0.4% YoY.
As per Gaura Sen Gupta, India Economist at IDFC First Bank, CPI moderation led by Core and base-effects. “The moderation was led by core inflation excluding tobacco which reduced to 4.3% in October from 4.6% in September. Food and beverages inflation remained elevated at 6.2%YoY in October v/s 6.3%YoY in September, led by cereals, spices and pulses. Broad-based pressure within food and beverages persists with 50% of food and beverages subcomponents by weight, seeing 6% or higher inflation in October,” said Gaura Sengupta.
Dharmakirti Joshi, Chief Economist, CRISILil, said the fall in core inflation was broad-based, indicating lower input cost pressures on producers and hence, on retail prices. For the December quarter, Joshi expects some softening in food inflation with the kharif harvest entering the market, aided by government intervention,” said on the inflation numbers.
“Oil prices remain an unknown, which could play spoilsport if the Middle East conflict escalates. We expect RBI to remain vigilant since headline inflation remains above the MPC’s 4% target and risks to food and fuel persist. Our base case for this fiscal is average inflation of 5.5% and the MPC maintaining the policy rate and stance,” Joshi further stated.
