India retail inflation eases to four-month low in October
Business
It is edging closer to the central bank's target of 4pc for start lower interest rates
NEW DELHI (Reuters) – India's retail inflation eased in October to a four-month low, edging closer to the central bank's target of 4 per cent, which it has said needs to be firmly in sight before it can start lowering rates.
Annual retail inflation fell to 4.87pc in October, down from 5.02pc the previous month. A Reuters poll of 53 economists had forecast a rate of 4.80pc.
Lower core inflation, which excludes volatile food and energy prices, and a supportive base effect helped bring down the overall figure.
Core inflation was estimated to be 4.20-4.28pc compared with 4.5pc in September, according to three economists. The Indian government does not release core inflation figures.
Food inflation, which accounts for nearly half of the overall consumer price basket, was 6.61pc in October, little changed from an upwardly revised 6.62pc in September.
October's inflation rate was below the Reserve Bank of India's (RBI) upper tolerance band of 2-6pc for a second consecutive month.
The central bank last month kept its key lending rate [at 6.50pc] steady for a fourth consecutive policy meeting and said it remains focused on bringing inflation close to the target of 4pc. It has raised rates by 250 basis points (bps) since May 2022 in a bid to cool surging prices.
Monday's data release indicates stable inflation, but a cautious approach would be the way forward, said Madan Sabnavis, an economist at Bank of Baroda.
Last week, RBI Governor Shaktikanta Das highlighted risks from a spike in food prices saying India was vulnerable to "recurring and overlapping" food price shocks despite the recent moderation in inflation.
Vegetable, milk and cereal prices have been volatile and among the key drivers of the Asian country's inflation.
While the uptick in food grain prices following an uneven monsoon has manifested in prices in October, higher prices of some vegetables like onions would be partly absorbed by the typical seasonal downtrend in many other vegetables, offering some respite, said Aditi Nayar, an economist at ICRA.
"The CPI inflation would climb to 5.6pc by December 2023, and remain in a wide range of 4.9-5.6pc thereafter for the next two quarters," Nayar said.
India has taken a number of steps to cool price rises since July when inflation spiked over 7pc. It has banned some exports of rice, wheat, sugar and tightened outbound shipments for onions.
