India’s retail inflation surged to a five-month high of 7.41 per cent in September, remaining above the Reserve Bank of India’s upper threshold of 6 per cent for three full quarters. This could prompt a formal explanation from the RBI to the government on why the inflation has breached the target limit. RBI has a mandate to keep CPI inflation at 4 per cent, with a range of +/-2 per cent. September retail inflation was sharply higher than the 7 per cent in August, 6.71 per cent in July. September CPI inflation was also markedly higher than a Reuters poll estimate of 7.3 per cent.
Analysts had projected the CPI inflation levels to rise on the back of rising food prices, oil production cuts and disruptions, and aggressive monetary policies by central banks across the world. The Reserve Bank of India, in its monetary policy committee decision, projected the inflation at 7.1 per cent and highlighted a downward trend in the following quarters. According to RBI’s assessment, inflation is expected to fall within the central bank’s comfort zone of 2-4 per cent in two years.
Food inflation in September 2022 came in at 8.41 percent as against 7.62 percent in the preceding month. Inflation rate for vegetables grew by 18.05 percent in September. For pulses, the inflation rate came in at 3.05 percent. Fuel and light inflation fell to 10.39 percent in contrast to 10.78 percent in August. Clothing & footwear inflation grew by 10.17 per cent. Apart from this, milk and products inflation rate came in at 7.13 per cent, fruits inflation rate rose by 5.68 per cent, spices grew by 16.88 per cent, while inflation rate for packaged meals, snacks or sweets increased by 7.76 per cent.
In September, RBI Governor Shaktikanta Das had said acute imported inflation pressures felt at the beginning of this fiscal year have eased but it still remains elevated across food and energy items. CPI data is primarily factored in by the RBI while preparing their bi-monthly monetary policy. The Monetary Policy Committee had, on September 30, hiked the repo rate by 50 basis points to 5.90 per cent. On September 30, the Monetary Policy Committee (MPC) hiked the repo rate by 50 basis points (bps) to 5.90 per cent.