India's CPI Inflation Eases To Four-Month Low At 4.87% In October
Food and beverage inflation was steady at 6.24% in October, as compared with 6.3% in September.
India's retail inflation eased in October, though headwinds to food inflation remain.
The Consumer Price Index-based inflation stood at 4.87% in October, as compared with 5.02% in September, according to data from the Ministry of Statistics and Programme Implementation released on Monday.
A panel of economists polled by Bloomberg had estimated a reading of 4.80% for October.
Food and beverage inflation was steady at 6.24% in October, as compared with 6.3% in September. Core inflation eased to 4.62% from 4.97% a month ago.
Consumer price inflation was within the central bank's target range of 4 (+/- 2)% for the second straight month.
India CPI inflation expectedly has taken a further dip, however, food inflation still continues to be almost at the same level, said Suman Chowdhury, chief economist and head of research at Acuité Ratings and Research.
Vegetable prices have increased sequentially by 3.3%, primarily due to a spurt in onion prices seen over the last month, he said. Given the concerns on the yield in the upcoming Kharif crop and the El Nino phenomenon, the downside risks to food inflation remain, he said.
Fuel and light inflation has been flattish largely due to the impact of the additional subsidy on LPG, Chowdhury said.
"We expect the headline inflation to average 5.6% in FY24 and remain in the band of 5-5.5% in the second half of the fiscal," Chowdhury said. "While that will be largely in line with RBI projections, we believe that the geopolitical risks in the background and the food output risks will keep the RBI MPC watchful and any reversal of the monetary policy stance is unlikely to happen before Q2 FY24.”
Inflation Internals
Cereal prices rose 10.65% in October, as compared with 10.95% in September.
Inflation in meat and fish was at 3.27%, up from 4.1% in the previous month.
Inflation in eggs was at 9.3%, as against 6.42% in the previous month.
Inflation in milk and milk products was at 6.4%, as compared with 6.9%.
Prices of oils and fats declined by 13.73%, after falling by 14% last month.
Vegetable prices rose 2.7%, as compared with 3.4%.
Pulses inflation was at 18.79% as against 16.4%.
Clothing and footwear inflation was at 4.3% versus 4.6%.
Housing inflation was at 3.8%, as compared with 3.95%.
Fuel and light inflation fell by 0.4%, as against 0.1%.
Headwinds To Inflation Remain
The broad-based pressure within food and beverages persists with 50% of the food and beverage subcomponents by weight, seeing 6% plus inflation in October, said Gaura Sen Gupta, India economist at IDFC First Bank.
The November CPI inflation estimate is tracking at 5.5%, as base effect turns adverse. High frequency food prices in the first two weeks of November show a slight rise in vegetable prices (month-on-month) and continued pick-up in cereals and pulses, Sen Gupta said.
The full impact of rise in onion prices—which had begun to increase in the second half of October—will be seen in the November CPI print, she said. That said, on a CPI weighted basis, overall vegetable price increase month-on-month is expected to be moderate as other vegetable items are seeing a decline.
The key risk to inflation outlook remains from food inflation due to the uneven monsoon performance and low reservoir levels, said Sen Gupta, who forecasts CPI inflation at 5.4% for the full year.
The moderation in core inflation indicates that generalisation of price pressures has not taken place, she said. Hence, the RBI is expected to remain on a prolonged pause in FY24 and possibly, even extending into mid-FY25. Waning support from base effects will push headline inflation briefly to about 6% in December and keep it above 5% in H1 2024 (till June 2024), according to Sen Gupta.