India’s retail inflation has eased to a four-month low of 4.87% in October, thanks to cooling food prices, 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, with the previous low inflation recorded at 4.87% in June.
While the data is on expected lines, economists have noted that food inflation remains high, with the food price index largely unchanged at 6.6%. Madan Sabnavis, chief economist at Bank of Baroda, cautioned that while stable inflation is indicated, there is no comfort from the monetary policy stance, and a cautious approach is necessary given potential kharif shortfalls in the coming months.
The Reserve Bank’s Monetary Policy Committee (MPC) projected CPI inflation at 5.4% for 2023-24, a moderation from 6.7% in 2022-23.
The government has tasked the RBI to ensure the CPI inflation remains at 4% with a margin of 2% on either side, and the central bank mainly factors in the retail inflation while arriving at its bi-monthly monetary policy.
Food inflation continues to remain high even as headline inflation numbers cool, with around 26% of the CPI witnessing high inflation in the food basket. The highest inflation was for spices, pulses, and cereals, while edible oils provided a major decline at 13.7%. Excluding this component, CPI would be as high as 5.6%.
Core inflation also remains high, and health and personal care continue to be pain points with higher inflation numbers of 5.9% and 7.8%, respectively.
The government data showed that cooling of food items like edible oil helped lower inflation in October. The data indicates stable inflation but does not provide any comfort from the monetary policy stance, cautioning that the kharif shortfalls would manifest in the coming months.
This news comes amid reports of Indians buying fewer clothes this season due to inflation, with foreign brands betting big on Bharat’s bulging wallets.
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