Informist, Tuesday, Nov. 12, 2024
NEW DELHI - India's CPI inflation rose to a 14-month high of 6.21% in October from 5.49% in September, data released Tuesday by the National Statistical Office showed. The rise in headline inflation was mainly because of a sequential rise in food prices.
At 6.21%, CPI inflation was sharply above consensus expectations. According to an Informist poll, the headline inflation rate was seen at 5.9% in October. This was the first month since August 2023 that headline inflation was above the upper bound of the Reserve Bank of India's medium-term target range of 2-6%. This was also the second month in a row when CPI inflation was above the central bank's 4% target after having come in below it in July and August.
Food inflation rose to a 15-month high of 10.87% in October from 9.24% in September. Sequentially, the food price index rose 2.6% in October, which pushed the general index of the CPI 1.3% higher from September.
Within food, the biggest month-on-month increase in prices was seen in vegetables, which rose 8.2% in October from the previous month. Edible oil prices also rose sharply in October, rising 6.0% on month from September. Prices of cereals and pulses also continued to rise in October.
Apart from food prices, the higher-than-expected headline inflation was also driven by the core inflation, which rose to a 10-month high of 3.7% in October. Core inflation, which strips out food and fuel items, was at 3.5% in September.
The rise in core inflation was led by the miscellaneous index, which rose to 4.32% in October from 4.05% in the previous month. The rise in "miscellaneous" inflation was driven by the 'personal care and effects' segment, where inflation rose to 10.99% last month from 9.00% in September. Housing inflation also rose to an eight-month high of 2.81% in October.
"We expect the uptick in food prices to keep the headline inflation higher than 5% even in the next reading before seasonal downturn begins to bring down inflation," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, said. If the November print does come in above 5%, it would mean that inflation is likely to average well above the RBI's forecast of 4.8% for Oct-Dec.
This was the last CPI inflation print available before the RBI's Monetary Policy Committee meets on Dec. 4-6. The rate-setting panel was previously expected to lower interest rates in December, having changed the policy stance to "neutral" from "withdrawal of accommodation" in the October meeting.
However, some economists now expect that the MPC would prefer to begin lowering rate in 2025. "Current trends suggest that inflation in the second half of FY25 may exceed the RBI's October projections, potentially delaying the start of a rate-cutting cycle," Rajani Sinha, chief economist at CareEdge Ratings said in a note.
The following table details sequential and annual increase in the main components in CPI (Combined):
| Weight | Index for October | Month-on-month change (in %) | Year-on-year change (in %) | ||
| October | September | ||||
| Cereals and products | 9.67 | 195.6 | 0.9% | 6.94% | 6.84% |
| Meat and fish | 3.61 | 224.7 | 0.6% | 3.17% | 2.62% |
| Egg | 0.43 | 195.9 | 1.9% | 4.87% | 6.36% |
| Milk and products | 6.61 | 187.3 | 0.2% | 2.97% | 3.03% |
| Oils and fats | 3.56 | 176.2 | 6.0% | 9.51% | 2.53% |
| Vegetables | 6.04 | 291.9 | 8.2% | 42.18% | 36.04% |
| Pulses and products | 2.38 | 216.8 | 0.4% | 7.43% | 9.81% |
| Sugar and confectionery | 1.36 | 131.9 | 0.2% | 2.57% | 3.46% |
| Spices | 2.50 | 228.1 | 0.0% | (-)7.01% | (-)6.13% |
| Food and beverages | 45.86 | 209.4 | 2.2% | 9.69% | 8.36 |
| Pan, tobacco and intoxicants | 2.38 | 209 | 0.2% | 2.50% | 2.51% |
| Clothing and footwear | 6.53 | 193.9 | 0.4% | 2.70% | 2.71% |
| Housing | 10.07 | 182.7 | 0.9% | 2.81% | 2.72% |
| Fuel and light | 6.84 | 176.9 | 0.0% | (-)1.61% | (-)1.34% |
| Miscellaneous | 28.32 | 185.8 | 0.4% | 4.32% | 4.05% |
| General Index | 100 | 196.8 | 1.3% | 6.21% | 5.49% |
| Consumer Food Price Index | 39.06 | 211.1 | 2.6% | 10.87% | 9.24% |
End
Reported by Shubham Rana
Edited by Tanima Banerjee
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