Consumer inflation up on pricey pulses

Consumer Price Index-based (CPI) inflation for October rose to five per cent - the highest in four months - compared with 4.41 per cent in September and 4.62 in October 2014, according to official data released on Thursday.

The rise in monthly retail inflation came on the back of increasing food prices, especially pulses, whose prices rose a staggering 42.2 per cent year-over-year for October.

According to data released by the Central Statistics Office, consumer food price inflation rose 5.25 per cent for October, compared with 3.88 per cent in both September 2015 and October last year. Among the sub-groups, the prices of pulses, which have a weightage of almost three per cent in the CPI index, rose 33.25 per cent for rural areas and 59.45 per cent year-over-year in October. Vegetables, with a weightage of 7.5 per cent, rose nearly two per cent combined, while cereals and products, with a weightage of 12.35 per cent, rose 1.5 per cent for the month.

The combined group of food and beverages, 54 per cent of the total index, rose 5.34 per cent, while fuel and light, with a weightage of nearly 8 per cent, showed an increase of 5.32 per cent.

Miscellaneous items, which includes household goods and services, health, transport and communication and has a weightage of 27.26 per cent, rose 3.51 per cent year-over-year in October.

"The inflation numbers have come as a surprise to the market in that they are higher than expectations. Prices of pulses remain a concern, but that will correct as more the price rise, the more people will grow pulses," said D K Joshi, chief economist at Crisil.

Analysts polled by Reuters had predicted October retail inflation to be 4.82 per cent year-on-year, while those polled by Bloomberg had forecast CPI inflation to come in at 4.9 per cent.

Preliminary data on rabi sowing released by the department of agriculture shows that chana has been planted in around 1.74 million hectares of land till October 30, up from 1.52 million hectares sown during the same period last year.

In total, chana is planted in around 8.77 million hectares of land during the rabi season, which means current acreage is just around 20 per cent of the usual area.

Overall, pulses, which also include lentils, have been sown in around 2.06 million hectares, down from 2.13 million hectares during the same period last year.

Crisil Chief Economist Joshi said the higher-than-anticipated inflation data meant that Reserve Bank of India (RBI) Governor Raghuram Rajan may not go in for a rate cut in the next monetary policy meeting in the first week of December. He, however, added that the inflation data for January 2016 would still likely be lower than 5.8 per cent that Rajan is targeting for that month, a view shared by other economists as well.