Even because the RBI and the federal government have been taking steps to regulate inflation, the value hikes of varied objects, particularly meals objects, have not too long ago affected the general numbers. The retail inflation goal of 4 per cent stays elusive for fairly a while. However, October 2023 grew to become the second month in a row when the CPI inflation got here inside the RBI’s higher tolerance restrict of 6 per cent.
The retail inflation in October slipped to a 4-month low of 4.87 per cent, primarily as a result of easing meals costs and inched in direction of the RBI’s goal of 4 per cent. The Consumer Price Index (CPI)-based retail inflation fell to a 3-month low of 5.02 per cent in September.
The inflation was recorded at 4.87 per cent in June. The RBI Monetary Policy Committee (MPC), in its October assembly, projected CPI inflation at 5.4 per cent for 2023-24, a moderation from 6.7 per cent in 2022-23.
The Latest CPI Numbers: Experts’ Analysis
Devendra Kumar Pant, chief economist & senior director (public finance) at India Ratings and Research, mentioned that whereas the decline in inflation in October 2023 is nice information, there are some causes of concern:
1) Food inflation has remained static in October 2023 at 6.61 per cent (September 2023: 6.62 per cent), cereals inflation remained in double-digits since September 2023,
2) Increasing pattern of egg, and fruits and pulses and merchandise inflation,
3) Decline in gasoline and lights and transport and communication inflation (as a result of freeze in pump costs of petrol and diesel),
4) Fall in miscellaneous (primarily providers) inflation,
5) Decline in core inflation (weak point in demand),
6) The decline in October 2023 retail inflation was from non-meals parts solely.
Pant additionally mentioned that going ahead, under-par monsoon rainfall is prone to have an effect on cereals inflation, this, together with pulses inflation (elevated to 18.79 per cent in October 2023 from 6.62 per cent in May 2023), is anticipated to maintain meals inflation elevated.
Food inflation has the potential to push retail inflation greater as witnessed in July and August 2023.
“The core inflation which has declined to 43 months low suggests weakness in demand conditions. The base effect will push up retail inflation in November 2023 towards 5.0-5.4 per cent range,” he mentioned.
Aditi Nayar, chief economist, head of analysis and outreach, ICRA Ltd, mentioned, “While the uptick in foodgrain prices following an uneven monsoon has manifested in prices in October, higher prices of some vegetables like onions would be partly absorbed by the typical seasonal downtrend in many other vegetables, offering some respite.”
On its affect on the RBI’s subsequent resolution, she mentioned the MPC is anticipated to keep up a hawkish tone amidst a established order on the charges and stance in its upcoming coverage assembly. “We see the earliest likelihood of a rate cut in August 2024, when a shallow rate cut cycle of 50-75 bps could commence.”
Upasna Bhardwaj, chief economist of Kotak Mahindra Bank, mentioned the moderation in inflation offers some aid, particularly because the core inflation has remained comfy.
“We continue to expect the MPC to remain on an extended pause phase in rates with liquidity being used as a more frequent tool to manage the stance,” Bhardwaj mentioned.
State-Wise CPI Inflation In October 2023
Among states, the inflation was above 6 per cent in Odisha, Rajasthan and Haryana. Inflation in states like Bihar, Gujarat, Karnataka, Telangana, Uttar Pradesh and Punjab dominated above the nationwide common of 4.87 per cent. The lowest inflation was witnessed in Chhattisgarh and Delhi.
