India’s retail inflation eased to a four-month low of 4.87% in October, mainly driven by cooling prices of food items, according to government data released on Monday. The Consumer Price Index (CPI) based retail inflation fell to a three-month low of 5.02% in September, marking a decline from the previous low of 4.87% in June.
Economists noted that while the data was in line with expectations, food inflation continues to remain high. Madan Sabnavis, chief economist at Bank of Baroda, stated that the food price index remained stable at 6.6%, indicating no significant relief from the monetary policy stance. He cautioned that the kharif shortfalls may manifest in the coming months as the harvest is now one month old.
The Reserve Bank’s Monetary Policy Committee (MPC) had projected CPI inflation at 5.4% for 2023-24 in its October meeting, down from 6.7% in 2022-23. The government has tasked the RBI with maintaining CPI inflation at 4% with a margin of 2% on either side, with the central bank primarily considering retail inflation in its bi-monthly monetary policy decisions.
Economists highlighted that food inflation continues to remain elevated, with a significant portion of the CPI attributing to high inflation in the food basket. Notably, edible oils saw a major decline of 13.7%, contributing to the overall decrease in inflation. Excluding this component, the CPI would have been as high as 5.6%. Additionally, core inflation and inflation in health and personal care remain high, posing challenges.
The data indicates that while headline inflation numbers have cooled, food inflation remains a concern. This situation has led to cautious forecasts for the months ahead and a need to closely monitor the evolving economic conditions.
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