Retail inflation rises to 9.8% in October

Retail inflation inched closer to the double-digit mark in October, mainly driven by rising prices of food and clothing items. Consumer price index (CPI)-based inflation rose to 9.75 per cent in October from 9.73 per cent the month before.

Inflation in urban areas eased to 9.46 per cent against 9.72 per cent in September, while in rural areas, it climbed to 9.98 per cent, compared with 9.79 per cent in the previous month.

The highest rise in prices during the month was recorded by sugar, up 19.61 per cent, year-on-year. It was followed by edible oil, which turned expensive by 17.92 per cent, while pulses were dearer by 14.89 per cent on the annual basis.

Vegetable prices during the month increased 10.74 per cent, while protein-rich items, like meat, fish and egg, became dearer by 12.18 per cent.

At the same time, clothings and footwears also witnessed an increase in prices at 10.47 per cent on an annual basis. Inflation in fuel and light remained relatively low at 7.58 per cent. The stubborn inflation numbers have been preventing the Reserve Bank of India (RBI) for a long time from reducing interest rates. In its recent review of the monetary policy, the apex bank expressed concern over this.

However, RBI had reduced the cash reserve ratio by 25 basis points bringing it to 4.25 per cent, to infuse additional liquidity into the financial system.

Various sections of the economy, especially industry lobby groups, have been calling for reduction of rates. More recently, even finance minister P Chidambaram expressed concern over RBI’s decision to not reduce the key policy rates.

The repo rate, at which RBI lends to banks, is eight per cent at present, while the reverse repo, at which RBI absorbs excess liquidity through borrowings from banks, is at eight per cent.