The spike in retail inflation is primarily due to the surge in the food prices, that touched an all-time high of 10.87 per cent in October
The retail inflation of India touched 6.21 per cent in October, thereby breaching the central bank’s target range for the first time in fourteen months as food prices remained extremely high, showed the data released by the Ministry of Statistics and Programme Implementation (MoSPI) on Tuesday.
This was the second time in a row, that India’s inflation rate calculated on the basis of the consumer price index (CPI) breached 5 per cent. India’s retail inflation was previously at a nine-month high of 5.49 per cent in September 2024. However, it was at 4.87 per cent in October 2023.
As per the mandate of the Reserve Bank of India (RBI), the inflation needs to be within the tolerance range of 2-6 per cent, with a medium-term target of 4 per cent.
The annual inflation for the food that accounts for nearly 50 per cent of the consumption basket spiked to 10.87 in October. Vegetables inflation hardened to a 57-month high of 42.18 per cent from 36 per cent in September 2024, which weighed on the food and beverages.
With an inflation rate breaching RBI’s tolerance level, economists expect the RBI to keep the repo rate unchanged in the coming monetary policy meeting. “With the CPI inflation breaching the 6 per cent mark in October 2024 and expected to exceed the MPC's estimate for Q3 FY2025 by at least 60-70 bps, a rate cut in the December 2024 policy review appears ruled out, despite our projection of a sub-7 per cent GDP growth print for Q2 FY2025. We anticipate that a shallow rate cut cycle of 50 bps may commence in February 2025 or later," said Aditi Nayar, Chief Economist and Head of Research and Outreach at ICRA Ltd.
The tightening of the RBI’s monetary policy helped bringing down the inflation rate after it touched an all-time high of 7.79 per cent in April 2022. The last time, India’s retail inflation rose above RBI's 6 per cent upper threshold was in August 2023.
The rural inflation rates stood at 6.68 per cent and urban inflation touched 5.62 per cent.
Industrial Production Gains Momentum
India’s industrial production (IIP) gained some momentum in September after witnessing a fall in the previous month. The factory output was up by 3.1 per cent in September, according to official data released on Tuesday. In the previous month of August, the factory output, based on the IIP was in the negative territory at (-) 0.1 per cent.
“The IIP growth rate for the month of September 2024 is 3.1 per cent which was (-) 0.1 per cent in the month of August 2024," an official statement said.