You are here: Home » Economy & Policy » News
Business Standard

Retail inflation refuses to cool down, prints 7.61% in October

Pulses, veggies, fuel, mobility and connectivity dominate price rise as economy recovers

retail inflation | Inflation

Abhishek Waghmare  |  Pune 

cpi, wpi, inflation, retail, food, prices, vegetables, markets, shops
Analysts think that this will put brakes on any further rate cuts soon, even as the MPC has kept its stance accommodative in its last meeting in October

Consumer price index based inflation, or the retail in the economy inched up a bit from the previous month, at 7.61 per cent in October.

The ongoing streak of rising has now continued for fifth consecutive month, and has remained over the comfort level for seven months. The Reserve Bank of India’s rate-setting monetary policy committee has a mandate to keep within the 2-6 per cent band. Rural consumer inflation has remained above the upper band for 11 straight months.

As the economy shows signs of recovery after being battered by the pandemic, rising inflation due to supply constraints comes as a worry, say experts.

Vegetables inflation stood at 22.5 per cent, that for pulses at 18.3 per cent, as protein rich food remained pricier compared to a year ago even in October.

Meat and fish inflation was 18.7 per cent, while that for eggs came in at 21.8 per cent.

Core inflation, which largely represents the state of demand in the economy, has largely remained in the same range for the last four months. In October 2020, it printed at 5.77 per cent, slightly up from 5.67 per cent in September, and the same as that in August.

RBI has projected that will remain in the range 5.4-4.5 per cent in the second half of FY21, October 2020 to March 2021. But in the first month itself, inflation has shown an uptick instead of moderation.

Analysts think that this will put brakes on any further rate cuts soon, even as the MPC has kept its stance accommodative in its last meeting in October.

“Despite the favourable base effect and the abundant kharif harvest, food inflation increased further in October 2020, led by vegetables as well as various other items. However, fresh arrivals in the market may help to cool off prices in the near term,” said Aditi Nayar, principal economist at Icra.

She said that the possibility of a rate cut in February too looks slim now, as inflation is expected to recede below six per cent only after December, according to her analysis.

Due to higher taxes on petrol and diesel, and the higher demand for mobile data and broadband as people still largely continue to work from home, inflation in transport and communication stayed elevated at 11.16 per cent.

Madan Sabnavis, chief economist at Care Ratings, said that the continued spike is due to the mismatch between the economicactivity subdued due to Covid-19 and the recovering arm.

“Inflation has been influenced by both taxes and increased prices as unlocking begins as service providers have increased rates as they have to operate with lower capacity utilisation,” he wrote in a note.

Inflation from health and recreation and amusement inflation has increased and unlikely to ease in next few months, said Devendra Pant, chief economist at India Ratings.

“While we expected inflation to decline in Q3 of FY21, it appears that while food inflation may decline with onset of winter and arrival of fresh onion crop, core inflation is likely to remain elevated in FY21,” he said.

“The phenomenon of food items pushing up overall inflation is getting more generalised now, though the reasons this time are prolonged monsoon and destruction of crops in the Deccan area,” Sabnavis added.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, November 12 2020. 19:45 IST