(Reuters) -India’s retail inflation in October accelerated to 6.21% year-on-year, breaching the central bank’s target range for the first time in over a year, as food prices remained stubbornly high, government data released on Tuesday showed.
The annual retail inflation was higher than the estimate of 5.81% in a Reuters poll of 45 economists. In September, inflation stood at 5.49%, which was a nine-month high.
COMMENTARY:
UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI
“The sharply higher-than-expected CPI inflation has largely been led by a surge in vegetable prices but also a sharp pickup in core inflation.”
“We expect the uptick in food prices to keep the headline inflation higher than 5% even in the next reading before a seasonal downturn begins to bring down inflation.”
“We expect the RBI to stay on hold in the upcoming December policy before considering a cautious easing from February.”
DEVENDRA KUMAR PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM
“Double-digit food inflation after a gap of 14 months is certainly not good news for the monetary authority.”
“September and October vegetable inflation was due to a strong adverse base effect. Going forward, vegetable inflation is expected to decline due to a favourable base effect and the onset of winter.”
“We expect a status-quo on the December 2024 monetary policy.”
GAURA SEN GUPTA, INDIA ECONOMIST, IDFC FIRST BANK, MUMBAI
“From a monetary policy perspective, RBI is expected to remain on pause in the December policy due to upside risks to near-term inflation outlook.”
“Daily retail prices indicate some reduction in vegetable prices in November, but it is not enough to counter the jump seen in the last few months. Third-quarter CPI inflation is tracking closer to 6% versus RBI’s estimate of 4.8%.”
“Food inflation pressures are expected to ease in the coming months with improvements in supplies. Kharif output is expected to be higher by 7%. That said, a strong reduction in food prices will be needed in the next few months for headline inflation to move towards the 4% target in Q4FY25.”
“We see significant upside risk to our and RBI’s FY25 CPI inflation estimate of 4.5%.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE
“The key culprit behind the spike in inflation in October was food costs, especially the over 40% increase in staple vegetables and pass-through of duty increases on oilseeds.”
“This reading will lift the quarterly inflation above the RBI’s projection for the second consecutive quarter.”
“With core inflation also stiffening up in the month, and the rupee weighed by a greenback rally, any remnant expectations of a rate cut in December will be put to bed.”
DIPANWITA MAZUMDAR, ECONOMIST, BANK OF BARODA, MUMBAI
“CPI continued to surprise on the upside. The transitory shocks to food inflation, led by a few volatile components, are becoming more entrenched now. Especially, the price cycle for vegetable inflation has lasted for more than a year now.”
“Concrete supply management policies are needed, with a focus on tackling climate risks and logistics, to deter the cobweb spiral in prices.”
“Outlook for food inflation doesn’t seem to be getting much comfort unless fresh arrivals enter from Q3 onwards.”
SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM
“Core inflation has now bottomed out as we had predicted and could inch further up in the coming months. This print is likely to be a one-off, and we continue to expect inflation to moderate back below 5% once the winter season sets in and with the arrival of the summer crop in the market.”
“That said, today’s inflation print closes the door for a rate cut in the December policy by the RBI. We see a possibility of a move only in the February policy.”
“Although given lingering inflationary pressures and the rising global uncertainty after the US election results, a February rate cut by the RBI is not a done deal. We see inflation averaging at 4.7% for FY25 and at 5.4% for Q3 FY25 — overshooting the RBI’s projections.”
GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA SECURITIES, MUMBAI
“India’s retail CPI inflation rose to a 14-month high of 6.21%, vs our estimate of 6.1%, as food prices continued to rise amid inclement weather, supply disruptions, and damage to perishable crops.”
“We do not expect food prices to correct before mid- November, thus preventing any meaningful moderation in the November CPI print.”
“Today’s CPI print, amid sharp depreciation of the rupee, rules out a December rate cut for RBI even though domestic consumption demand is easing.”
