Retail inflation inches up to 7.61% in October

Elevated vegetable prices keep price gains above 7% for a second straight month .

Updated - November 12, 2020 10:07 pm IST

Published - November 12, 2020 06:20 pm IST - New Delhi

Driven by rising food prices, retail inflation inched up to 7.61% in October, remaining above the comfort level of the Reserve Bank. File

Driven by rising food prices, retail inflation inched up to 7.61% in October, remaining above the comfort level of the Reserve Bank. File

India’s retail inflation remained above 7% in October for a second straight month as vegetable prices stayed at elevated levels, worrying policymakers, who are struggling to pull Asia’s third-largest economy from a deep slump.

October’s retail inflation of 7.61% was higher than the forecast of 7.3% in a Reuters’ poll of economists. It was 7.27% in September, official data showed on Thursday.

Retail inflation has remained above 4%, the middle-point of the Reserve Bank of India’s (RBI) target of 2%-6%, for more than a year, giving it little room to cut interest rates.

India’s economy is likely to enter a technical recession for the first time in its post-independence history, as a nowcast in an article in the RBI’s bulletin sees a contraction of 8.6% in the July-September quarter.

The country reported a 23.9% contraction in the April-June quarter.

Two consecutive quarters of contraction are described as a recession.

The main factor leading to higher inflation was elevated food inflation, which stood at 11.07% in October compared with 10.68% in the previous month.

‘Likely to persist’

“High food inflation despite easing restrictions and improving mobility numbers indicates the problem is more complex and likely to persist in the near future,” said Anagha Deodhar, economist at ICICI Securities.

Disruption from the COVID-19 pandemic and excessive rainfall in States such as Maharashtra, Karnataka and Andhra Pradesh have damaged and delayed the harvesting of onions — a key ingredient in Indian kitchens — alongside other vegetables.

October’s core inflation was in the range of 5.5% to 5.8%, according to four analysts, compared with 5.7% in September.

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