Retail inflation at 16-month high; crosses RBI’s comfort level at 4.62% in October

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Updated: November 13, 2019 6:53 PM

Food inflation can be attributed to the spike in retail prices as Consumer Food Price Inflation (CFPI) skyrocketed 7.89 per cent in October.

retail inflation, cpi, consumer price, consumer inflation, inflation in retail prices, onion prices, tomato pricesTo maintain price stability, the government had set a medium-term inflation target of 4 per cent.

Retail prices in India have surged to a 16-month high in October 2019. The retail prices indicator– Consumer Price Index (CPI) — grew at 4.62 per cent, exceeding RBI’s benchmark of 4 per cent, according to the Ministry of Statistics and Programme Implementation (MOSPI).  To keep the retail prices stable, the government has notified a medium-term inflation target of 4 per cent till March 2021. Food inflation can be attributed to the spike in retail prices as Consumer Food Price Inflation (CFPI) skyrocketed 7.89 per cent in October. The prices of vegetables and pulses rose dramatically by 26 per cent and 12 per cent on-year respectively. The prices of meat and fish also rose nearly 10 per cent. 

The effect of surging prices was largely seen in Assam and Kerala where the retail inflation rose by more than 6 per cent. On the other hand, Chhattisgarh and Bihar witnessed a low inflation rate of under 2 per cent in October.

“Looking ahead, we expect the core-CPI inflation to inch up modestly from the level recorded in October 2019, but not breach 4%. The pace of normalisation in vegetable prices will be the key driver of the trend in food inflation over the next few months,” said Aditi Nayar, Principal Economist, ICRA.  

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India’s retail inflation rate rose to 3.99 percent on-year in September 2019, which was the highest inflation rate since July last year, as food prices rose to an over three-year high. The WPI inflation rate, on the other hand, fell to a 39-month low of 0.33 per cent from 1.08 per cent over the same period. This has largely to do with more weight that the food items have in the CPI than in the WPI. The food items have around 15 per cent weight in the WPI and more than 45 per cent in the CPI.

Meanwhile, RBI has significantly revised down median forecasts of inflation for 2019-20 since the November 2018 round of the RBI survey. The average inflation for 2019-20 was pegged at 4.8 per cent by the professional forecasters, which was revised down gradually to 3.5 per cent in September 2019. 

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