Retail inflation at a 14-month high, rises to 6.21% in October

Retail inflation in India rose to 6.21% in October, up from 5.49% in September 2024, marking a sharp increase driven by high food prices. In comparison, retail inflation stood at 3.65% in August 2024 and 3.54% in July 2024.
Inflation in October climbed above the Reserve Bank of India’s (RBI) 6% tolerance threshold, marking the first breach of this level in 14 months since August 2023.

CPI and CFPI data (Source: PIB)

In September, inflation had already surpassed the RBI’s medium-term target of 4% for the first time since July. A year ago, retail inflation in India stood at 4.87%, as per government data released on Tuesday.
Food inflation, accounting for nearly half of the Consumer Price Index (CPI) basket, climbed to 9.69% in October, an increase from 9.24% in September. Inflation in rural areas also rose to 6.68%, up from 5.87% in the previous month, while urban inflation increased to 5.62% from 5.05% in September.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, “The sharply higher than expected CPI inflation has largely been led by 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 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.”
Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers said that the inflation for Oct’24 was significantly higher then our estimates.
“The rise was driven by food products particularly the vegetables rising above 42% y-o-y. While the components of the core saw some uptick, the current inflation trajectory is guided by the food inflation. The numbers for the last 2 months remaining above the RBI’s target level of 4% has further receded the rate cut expectations in next month. This is consistent with our view that the rate cuts will begin only in the beginning of 2025. We believe that the good monsoon and better rabi harvest shall result in lower food price volatility in next quarter,” he added.