New Delhi, 13 November 2024: India’s retail inflation hit a 14-month high in October, rising to 6.21% from 5.49% in September, surpassing the Reserve Bank of India’s (RBI) upper tolerance limit of 6%. The spike was primarily attributed to rising food prices, marking a significant increase in the Consumer Price Index (CPI) inflation, which stood at 4.87% in the same month last year.
According to data released by the National Statistics Office (NSO) on Tuesday, food inflation surged to 10.87% in October, up from 9.24% in September and significantly higher than the 6.61% recorded in October 2023. This sharp increase in food prices, particularly in vegetables, fruits, and edible oils, has been a major factor driving the inflation rate beyond the RBI’s comfort zone.
The CPI inflation rate for rural and urban areas stood at 6.68% and 5.62%, respectively. The RBI, mandated by the government to maintain inflation around 4% with a 2% margin, has kept short-term lending rates unchanged, given ongoing inflation concerns. The central bank’s target range of 2-6% for inflation has been breached, raising alarms over potential policy actions in the upcoming monetary policy committee (MPC) meetings.
ICRA’s Chief Economist, Aditi Nair, noted that the October retail inflation figure was 60-70 basis points higher than the MPC’s expectations for the third quarter of FY25. “Given the elevated inflation levels, a rate cut at the December MPC meeting seems unlikely,” she said, predicting potential rate cuts of up to 50 basis points might only commence from February 2025 or later.
Despite declines in sub-groups such as pulses, eggs, sugar, and spices, the overall inflation was propelled by higher costs in vegetables, fruits, and oils. The NSO’s data, gathered from 1,114 urban markets and 1,181 villages across India, revealed that the steady rise in essential food items contributed significantly to the overall inflationary trend.
Economists have expressed concerns over the sustained increase in food prices and its impact on the broader inflationary landscape, warning that it could delay any immediate relief through rate cuts from the RBI. The data underscores ongoing economic pressures as the country grapples with fluctuating food supply dynamics and seasonal price shifts.
