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| Photo Credit: Sushil Kumar Verma
India’s retail inflation shot back to a nine-month high of 5.5% in September, breaking a two-month streak under the central bank’s median target of 4%, thanks to a resurgence in food price rise to 9.24% after hovering below the 6% mark through July and August.
Vegetable inflation surged from 10.7% in August to a 14-month high of 36% in September, while fruit price rise gained momentum to hit 7.65% from 6.5% a month earlier.
For rural consumers, inflation neared the 6% mark — the upper tolerance limit for the Reserve Bank of India (RBI) — to hit 5.9%, while their urban counterparts faced a price rise of 5.05% last month. Rural India, however, faced a relatively milder food inflation of 9.1% compared with a 9.6% rise faced by urban consumers.
Prices of pulses rose 9.81%, retreating from a 10%-plus inflation pace for the first time in 16 months, even as price rise of cereals and eggs eased marginally to 6.8% and 6.3%, respectively. However, edible oils recorded a 2.5% uptick, breaking a 19-month streak of dipping prices, amid a global hardening of prices.
Beyond food, households saw a sharp uptick of 9% in prices of personal care and effects in September. Prices for this category rose 8.4% in July and eased a tad to 7.9% in August. Core inflation that excludes food and energy prices, also rose to a nine-month high of 3.8%, in line with RBI Governor Shaktikanta Das’ assertion that this element of price rise had bottomed out.
Rate cut
While the RBI changed its monetary policy stance to neutral last week, expectations of a rate cut may take a while to materialise, with the central bank projecting an average inflation of 4.8% for the October-December quarter, before cooling to 4.2% in the first quarter of 2025.
“For a rate cut to be forthcoming in the December monetary policy review, either the consumer price inflation will need to flatten considerably below 5.0% in October or the GDP growth for Q2 FY2025 will need to significantly undershoot the MPC’s expectations,” reckoned ICRA chief economist Aditi Nayar.
“It is likely that the increase in inflation rate for the month of September 2024 is due to high base effect and weather conditions,” the National Statistical Office (NSO) said, even as it highlighted a “significant decline in inflation is observed in pulses and products, spices, meat & fish and sugar & confectionery”.
Kharif harvest may cool prices
Economists expect some relief on the inflation front through this month and November, pinning their hopes on beneficial base effects from last year, and the prospects of food prices cooling with the arrival of the Kharif harvest.
As many as eight of the 22 States and Union Territories that the NSO calculates inflation rates for, experienced higher price rise than the national average of 5.5%. Six of those States recorded over 6% inflation in September – Bihar (7.5%), Chhattisgarh (7.4%), Uttar Pradesh (6.74%), Odisha (6.6%), Haryana (6.2%), and Gujarat (6.05%).
Published – October 14, 2024 05:54 pm IST