October inflation data point A welcome softening in price gains should provide some support to monetary policy authorities, which have been struggling to contain runaway inflation since the beginning of this year. based on retail inflation, or price gains Consumer Price Index slowed down to 6.77% last monthFrom 7.41% of September, aided by a significant decline in food price inflation. The year-on-year inflation based on the Consumer Food Price Index eased by about 160 basis points to 7.01% in October from 8.60% in the previous month, due to “decline in prices of vegetables, fruits, pulses and oils and fats”, The government said. With the food and beverage sub-index representing around 46% of the CPI’s weight, the slowdown in food prices dampened overall inflation, even as three other essentials such as clothing and footwear, housing and health Price gains across categories either persisted, changed little or accelerated since September. Inflation at wholesale price levels also continued to decline, with headline reading down in single digits for the first time in 19 months. Amid uncertainty in advanced economies A favorable base effect along with a distinct chill in international prices of commodities including crude oil and steel was largely instrumental in curtailing wholesale price gains.
Nevertheless, a closer look at the sequential trends in retail inflation, especially in food, reveals an imperative for policymakers to remain vigilant. While year-on-year inflation in vegetable prices slowed sharply to 7.77% last month, from September’s breathless 18% pace, month-on-month gains rose to a four-month high of 4.1% and pointed to concerns. It believes that supply disruptions in vegetable growing regions due to unseasonal rains as well as logistics difficulties arising out of monsoon floods may continue to cause prices to fluctuate, at least in the near term. Prices of staple cereals, including rice and wheat, also remain a cause for concern, despite concerted efforts by the government to quell volatility by using export control measures. While inflation in the biggest weighting in the food basket ticked up to 12.1% in October, from 11.5% in the previous month, sequentially, price gains came in at 1%, easing momentum from September. Reports of paddy crop being drowned or affected due to heavy rains in various parts of the country, as well as shortage of wheat and flour, which has pushed up their prices, all indicate further volatility in grain prices. Executives may risk letting their guard down in the fight against inflation, with S&P Global’s latest Business Outlook survey pointing to increased wage pressures and a productive pass-through of costs.