A view of a vegetable market in New Delhi. File
| Photo Credit: Sushil Kumar Verma
India’s retail inflation pace eased to a four-month low of 4.87% in October from a tad over 5% in September, with the rise in vegetables prices easing to 2.7% from 3.4% even though overall consumer food price inflation remained virtually unchanged at 6.6%.
While base effects from last October, when retail prices surged 6.8%, helped cool the headline inflation rate, some deceleration was also seen in prices of non-food items such as services, clothing and footwear as well as fuel and light. Aided by the LPG cylinder price cuts, fuel and light costs dropped 0.4% from last October’s levels.
Inflation faced by rural consumers eased from 5.33% in September to 5.1%, but urban households saw a fractional increase in inflation at 4.65%. On a month-on-month basis, consumer prices were up 0.65%, while food prices were up 1.06%, with urban food prices rising 1.14%.
The Reserve Bank of India (RBI), which expects inflation to average 5.6% between October and December, is unlikely to lower interest rates anytime soon especially as the food price situation remains sticky and reversed its sequential direction from a 2.2% month-on-month drop in September. The RBI has recently vowed to remain focused on price rise till it sustains around it 4% target, rather than be satisfied with inflation prints between the 4% mark and the upper tolerance threshold of 6%.
While there was some slight relief in the inflation rates for cereals (from 11% in September to 10.65% in October), meat and fish (from 4.1% to 3.3%), milk (down from 6.9% to 6.44%) and Spices, which remained elevated at 22.8% in October, these were offset by gains on other fronts.
The pace of price rise in key protein sources like pulses and eggs accelerated sharply to 18.8% and 9.3%, respectively, inflation in fruits and sugar also picked up pace to hit 9.34% and 5.5%.
“This does not provide any comfort from the monetary policy stance,” reckoned Bank of Baroda chief economist Madan Sabnavis, referring to the unchanged food price inflation and the likelihood of Kharif crop shortfalls manifesting in the coming months.
If edible oils, whose prices dropped 13.7% year-on-year in October, were excluded, the overall consumer price inflation would have been as 5.6%, Mr. Sabnavis pointed out.
While the rise personal care services’ prices eased a bit to 7.84% from 8.5% in September, as did education (down to 5.07% from 5.3%), healthcare inflation remained sticky at 5.9%. Transport and communication inflation dropped to 2% from 2.3% in the previous month, and clothing and footwear inflation receded to 4.3% in October from 4.6% in September.
As many as six States recorded inflation rates of 4% or lower, including Tamil Nadu, Madhya Pradesh, the erstwhile State of Jammu and Kashmir, with Chhattisgarh (2.44%) and Delhi (2.5%) recording the lowest inflation in October.
On the other hand, nine States recorded higher inflation than the 4.87% national average, with three of them crossing the 6% mark – Odisha (6.5%), Rajasthan (6.25%) and Haryana (6.02%). In September, 13 of the 22 major States for which the National Statistical Office releases inflation rates, had recorded higher inflation than the 5.02% national average.
October’s inflation relief is expected to reverse course from this month, in line with the RBI’s projection of a 5.6% average for this quarter and 5.4% through 2023-24.
“Inflation as per the Consumer Price Index (CPI) would climb to 5.6% by December, and remain in a wide range of 4.9-5.6% thereafter for the next two quarters, before a particularly benign base effect temporarily dampens it in the second quarter of 2024-25,” said Aditi Nayar, chief economist at rating firm ICRA.