In October, India experiences a four-month low as retail inflation decreases to 4.87%.

14 Nov, 2023

In October, India experiences a four-month low as retail inflation decreases to 4.87%.

India witnessed a notable downturn in its annual retail inflation, recording a four-month low of 4.87% in October, compared to the previous month's figure of 5.02%, according to government data released on Monday.

A significant contributor to the overall consumer price basket, food inflation rose marginally to 6.61% in October from 6.56% in September. While October's Consumer Price Index (CPI)-based inflation remained below the Reserve Bank of India's (RBI) upper tolerance band of 4-6% for a second consecutive month, the central bank maintained its key lending rate for the fourth consecutive policy meeting. The RBI reiterated its commitment to bringing inflation closer to the 4% target.

Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, stated, "The CPI inflation came in line with our expectations. The moderation provides some relief, especially as core inflation has remained comfortable. However, we expect the trend of sub-5% headline inflation to remain brief."

Sakshi Gupta, Principal Economist at HDFC Bank, noted, "CPI inflation moderated below 5% in October. However, it was higher than expected driven by a sequential increase in vegetables (particularly onions) and pulses inflation. Inflation could inch back up above 5% next month, and food inflation continues to remain a concern."

The Reserve Bank's Monetary Policy Committee (MPC), in its October meeting, projected CPI inflation at 5.4% for 2023-24, reflecting a moderation from 6.7% in 2022-23. The central bank primarily considers retail inflation in formulating its bi-monthly monetary policy.

Aditi Nayar, an economist at ICRA, commented on the recent uptick in foodgrain prices, stating, "While the uptick in foodgrain prices following an uneven monsoon has manifested in prices in October, higher prices of some vegetables like onions would be partly absorbed by the typical seasonal downtrend in many other vegetables, offering some respite."

Nayar also projected that CPI inflation would climb to 5.6% by December 2023, remaining in a range of 4.9-5.6% for the next two quarters.

This moderation in retail inflation provides a temporary reprieve, with experts anticipating a nuanced trajectory in the coming months.