CPI Inflation Rises To Five-Month High Of 7.41% In September

India’s retail inflation saw an uptick led by a rise in food prices.

<div class="paragraphs"><p>(Photo:&nbsp;Stephanie L/Unsplash)</p></div>
(Photo: Stephanie L/Unsplash)

India’s retail inflation saw an uptick led by a rise in food prices.

The Consumer Price Index inflation rose to 7.41% in September from 7% in August, according to data released by the Ministry of Statistics and Programme Implementation on Wednesday.

A Bloomberg poll of 36 economists had estimated a reading of 7.36%.

Inflation in food and beverages was at 8.41% against 7.6% in August.

Core inflation—excluding food and fuel—rose to 6.33%, compared to 6.11% in August.

Headline inflation remains above the Reserve Bank of India’s upper target for the ninth straight month. Breach of the target for three straight quarters requires the central bank to write a letter to the government explaining the failure.

To quell inflation, the Monetary Policy Committee has raised the policy repo rate to 5.9% so far.

The CPI inflation jumped to a sharper-than-expected, five-month high in September, with the sequential increase being primarily driven by food inflation, said Aditi Nayar, chief economist at ICRA.

Food inflation spiked to a 22-month high of 8.4% in September, with a sharp sequential upmove in vegetables, cereals and spices, she said.

According to Suvodeep Rakshit, senior economist at Kotak Institutional Equities, lower acreage and unseasonal rains will continue to impart upside to food prices.

"The September inflation print should keep the RBI on course for a 35 basis point hike in December with inflation remaining above 6% at least till February 2023 and reduce gradually toward the 4.5-5.5% range in FY24," Rakshit said.

Inflation Internals

  • Cereal prices rose 11.5% annually in September, compared with a 9.6% increase in the previous month.

  • Inflation in meat and fish was at 2.55%, compared with 1% in August.

  • Inflation in milk was at 7.13%, compared with 6.4% in the previous month.

  • Inflation in oils and fats was at 0.37% against 4.6%.

  • Vegetable prices rose 18.05% over a year earlier, compared with an increase of 13.2% in the previous month.

  • Pulses inflation was at 3.05%, compared with 2.5% in the preceding month.

  • Clothing and footwear inflation was at 10.17% against 9.91% a month ago.

  • Housing inflation stood at 4.57%, compared with 4.1% in August.

  • Fuel and light inflation stood at 10.39% against 10.8% in August.

Food And Beverage Inflation At A 22-Month High

The key factor in the higher inflation print has been food inflation which has increased sequentially by 0.9%, leading to the overall inflation going up by 0.6% over the index in the previous month, said Suman Chowdhury, Chief Analytical Officer, Acuité Ratings and Research.

Irregular rainfall in September has been the primary reason behind higher inflation in vegetables and fruits, which is likely temporary in nature, he said.

While the inflation in cereals has also inched up, the steps being taken by the government and a reasonably healthy kharif output are expected to address the concerns behind the further hike in cereal prices, he said.

On a sequential basis, vegetables inflation rose by 2.6% in September, while cereals rose by 2% in the same duration.