Retail inflation in October 2023: Volatile food prices, which make up about half of the consumer price index (CPI) basket, have probably moderated, following a spike in July and August
The retail inflation in October 2023, the data of which is slated to be released on Monday, November 13, is likely to have eased to a 4-month low of 4.8 per cent, according to analysts. The 4.8 per cent inflation is closer to the Reserve Bank of India’s (RBI) medium-term target of 4 per cent.
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India’s retail inflation in September 2023 declined to a three-month low of 5.02 per cent, mainly due to easing food prices. With this, the CPI inflation came back to the RBI’s comfort level of below 6 per cent after a gap of two months.
The inflation based on the Consumer Price Index (CPI) had stood at 6.83 per cent in August.
In October 2023, volatile food prices, which make up about half of the consumer price index (CPI) basket, have probably moderated, following a spike in July and August, according to a Reuters‘ poll. However, prices of onions, a staple in Indian cooking, are still rising sharply.
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The Reuters poll of 53 economists, conducted during November 6-9, said CPI was at an annual rate of 4.80 per cent in October, slower than 5.02 per cent in September.
Forecasts for the data were in a 4.47 per cent-5.55 per cent range.
Radhika Rao, senior economist at DBS Bank, said, “Inflation is expected to have a choppy ride in the months ahead… Passage of base effects and a sharper rise in selected vegetable prices are likely to take the headline back above 5% this quarter and keep in that territory into 1Q24.”
She added that the central bank has opted to be cautious on the inflation outlook…(and) will be more inclined to extend its pause for the time being before venturing out to consider a change in stance as a precursor to a change in the policy direction.
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The central bank is expected to keep its key policy rate unchanged at 6.50 per cent at least until end-June 2024 before cutting it by 25 basis points in the following quarter, a separate Reuters survey showed.
V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, “The decline in CPI is likely to continue, taking the October CPI print to 4.9 per cent. The decline in vegetable and edible oil prices can facilitate the downward shift in CPI inflation. Decline in Brent crude from the September high of $96 to around $80 now is a big relief.”
Rahul Bajoria, MD & head of EM Asia (ex-China) Economics at Barclays, in a report said CPI inflation is estimated to slow further to 4.6 per cent year-on-year in October, as food inflation continued to ease, but this reprieve is likely to be fleeting, as onion prices are climbing. Pressures from non-perishable food prices also persist.
Core inflation was broadly stable, supported by easing momentum and base effects, Bajoria said.
(With Inputs from Agencies)
