Inflation: Retail inflation rose to 6.21 percent in October

New Delhi| India’s retail inflation rose to 6.21 per cent year-on-year in the month of October, up from a 9-month high of 5.49 per cent in the previous month. The main reason for the increase in inflation rate is the rising prices of food items. Retail inflation in October has surpassed the Reserve Bank of India’s (RBI) tolerance band of 6 per cent for the first time in 14 months, that is, for the first time since August 2023.

Retail inflation rose to 6.21 percent in October from 5.49 percent the month before, according to official data released Tuesday. Inflation has increased due to rise in prices of food items. It has crossed the upper level of the tolerance band of the Reserve Bank of India (RBI).

Consumer Price Index based inflation was 4.87 percent in October 2023. Food commodity inflation rose to 10.87 per cent in October, compared with 9.24 per cent in September and 6.61 per cent in the same month a year ago, data from the Office for National Statistics showed.

The RBI, which kept the key short-term lending rate unchanged earlier this month, has been tasked by the government to ensure that inflation remains at 4 per cent with a margin of 2 per cent.

“The annual inflation rate based on All India Consumer Price Index (CPI) in October 2024 is 6.21 per cent”, NSO said. The inflation rate for rural and urban area is 6.68 percent and 5.62 percent respectively.

NSO data showed a significant decline in inflation in the subgroup of ‘pulses’, eggs, ‘sugar and confectionery’ and spices during October 2024. “High food inflation in October 2024 increased mainly due to price increases for vegetables, fruits and oils and fats”, NSO said

ICRA chief economist Aditi Nair said CPI inflation rose alarmingly to a 14-month high in October 2024, surpassing the MPC’s medium-term target range of an upper limit of 2-6 per cent.

“The gradual increase in inflation was mainly due to increase in food and beverage prices”, he said. This was followed by a slight increase in the price of other major commodities.” Nair further said retail inflation has crossed the tolerance band of 6 per cent and is expected to remain at least 60-70 bps higher than MPC estimates for Q3 FY2025, “so there is no possibility of a rate cut at the December 2024 MPC meeting”

“We estimate that a string of 50 basis point rate cuts could begin in February 2025 or later”, he said The RBI had kept key short-term interest rates unchanged after the last monetary policy review in October, citing concerns on the inflation front. Price statistics are collected from selected 1,114 urban markets and 1,181 villages across the country on the basis of a weekly roster from NSO.