Retail inflation climbed to a 16-month high of 4.62% in October, driven by food inflation, which hit its highest level since August 2016, official data on Wednesday showed.
The Consumer Price Index (CPI) grew sharply in October from 3.99% in September, which itself was the highest reading in 14 months. The inflation level in October breached the 4% benchmark, set by the RBI and the Finance Ministry till 2021. It, however, still remains within the upper limit of 6%. Within the CPI, inflation in the food and beverages category continued its sharp acceleration, at 6.93%. This figure is the highest since August 2016. Food inflation was at 4.7% in September, the highest in nearly two years.
“The overall jump in inflation partly reflects the spurt in demand because of the festive season in October and partly the impact of scarcity of the monsoon in certain areas of the country,” D.K. Srivastava, chief policy adviser at EY India, said. “Some of the crops were affected and there was a scarcity.”
“It reflects a need to calibrate our food imports with the emerging scarcities,” Mr. Srivastava added. “The supply side should have been managed better.”
The other factor affecting the jump in food price inflation is the base effect, according to economists, since inflation during the same period of 2018 was low.
“October 2019 CPI inflation increase was led primarily by seasonal items such as eggs, fruits, vegetables, and pulses and products,” Devendra Pant, chief economist, India Ratings and Research, said. “All these prices increases are cyclical in nature and have strong base effect-low inflation in 2018.”
Inflation in the paan, tobacco and other intoxicants category eased to 3.92% in October from 4.59% in the previous month. The housing sector also saw inflation easing in October, to 4.58% from 4.75%.
The fuel and light category saw a continued contraction in prices by 2.02% in October, compared with a contraction of 2.18% in the previous month. October marks the fourth consecutive month of contracting fuel prices.
Inflation in the clothing and footwear category quickened to 1.65% in October from 0.96% in September.
“With the economic growth slowdown, India Ratings and Research believes growth concerns will dominate in the RBI’s monetary policy review and the RBI to continue with accommodative policy and expect further rate cut in the policy review of December 2019,” Mr. Pant added.
