Retail inflation in India hits 14-month high at 6.21% in October, food prices surge

India’s retail inflation climbed to 6.21% in October 2024, rising from 5.49% in September. This increase marks the highest inflation rate in 14 months and represents a breach of the Reserve Bank of India’s (RBI) tolerance limit of 6% for the first time since August 2023. October’s Consumer Price Index (CPI) data, published by the Ministry of Statistics and Programme Implementation, shows the surge was primarily driven by rising food prices, particularly in vegetables.

Vegetable prices saw the steepest rise, increasing by 42.18% year-over-year in October, up from a 36% increase in September. Other major food categories also recorded substantial price hikes. Cereal prices grew by 6.94% in October, slightly higher than September’s rate of 6.84%. Oils and fats experienced a significant jump, with prices increasing to 9.51% in October, compared to 2.47% in September, largely due to elevated edible oil costs. Additionally, pulses registered an inflation rate of 7.43%, while in September, they were at 9.89%.

The October CPI data indicates that food inflation, which makes up about 50% of the CPI basket, rose to 9.69%, compared to 9.24% in September. Urban and rural inflation rates also rose, with rural areas experiencing an inflation rate of 6.68% in October, up from 5.87% in September, while urban inflation reached 5.62%, an increase from 5.05% in the previous month. These trends underscore the role of food prices as a major driver of overall inflation.

The overall core inflation rate, which excludes food and fuel prices, was approximately 3.7% in October, maintaining relative stability. However, the sharp increases in key food items have put additional pressure on the broader CPI. Retail inflation breached the RBI’s medium-term target of 4% for the second month in a row, as September’s inflation rate was recorded at 5.49%.

The RBI’s inflation targeting framework mandates a tolerance range of 2% to 6%, with a target of 4%. However, October’s inflation crossed this range, signaling continued inflationary pressures in the economy. Food items, including cereals, oils, and vegetables, led the increase in prices. The inflation rate for cereals in October remained high at 6.94%, while oils and fats rose to 9.51% due to fluctuations in edible oil prices. With inflation at elevated levels, interest rate cut expectations have been revised, with many forecasters expecting a rate hold in the RBI’s upcoming December policy meeting.