Retail inflation cools to 6.77% in October from 7.41% in September

A scene at wholesale vegetable market Azadpur Mandi, in New Delhi. File
| Photo Credit: Sushil Kumar Verma

India’s retail inflation cooled to 6.77% in October from 7.41% in September, slipping below the 7% mark for the first time in three months and only the second time since April’s eight-year high mark of 7.8%.

This is the tenth month in a row that inflation has been over the 6% upper tolerance threshold mandated for the Reserve Bank of India (RBI). The central bank’s Monetary Policy Committee met earlier this month to deliberate on the explanation to be sent to the government for it inability to meet the target for three successive quarters.

Rural consumers continued to face 7% inflation in October, slightly lower than the 7.6% in September, while urban India consumers’ price rise eased to 6.5% from 7.3% in the previous month.

Inflation measured by the Consumer Food Price Index moderated from 8.6% in September to 7% in October, but rural households faced 7.3% inflation while the same rate was 6.5% for their urban counterparts.

On a sequential basis, the Consumer Price Index was 0.8% higher in October compared to September, while the Consumer Food Price Index was up 1.1%.

Cereals inflation remained sticky, rising from 11.53% in September to 12.1% in October, with rural India facing nearly 12.7% inflation. Similarly, vegetables inflation dropped sharply to 7.8% from 18.05% in September, with urban and rural consumers seeing prices rise 6.6% and 8.45%, respectively.

Inflation in clothing and footwear, which has been over 8% since last December, remained virtually unchanged around 10.2%, with footwear price inflation staying over 12%. 

Fuel and light inflation dropped a shade to 9.93% in October after being above the 10% mark for four months, but was 11% for urban households compared to 9.2% for rural India.

“Rural India has witnessed higher inflation as food prices are higher here and have a higher share in the basket,” explained Bank of Baroda chief economist Madan Sabnavis. Food prices remain a risk to the inflation trajectory as vegetable prices and cereals have increased and don’t show signs of moderating right now, he added.

“Given that the RBI had given an explanation on inflation to the government, we do expect it to continue to increase the repo rate, albeit by a smaller quantity of 25-35 basis points in the coming policy to be in tune with what other central banks are doing,” Mr. Sabnavis reckoned. One basis point equals 0.01%.