India's headline retail inflation likely fell to a five-month low in October, returning below the 5 percent-mark after a gap of three months thanks to the combination of a favourable base effect and cooling prices of some items. However, rising onion prices kept the fall in inflation in check.
According to a Moneycontrol survey of 23 economists, Consumer Price Index (CPI) inflation may have edged down to 4.8 percent from 5.02 percent in September.
The Ministry of Statistics and Programme Implementation will release retail inflation data for October at 5:30 pm on November 13.
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While the tomato-led vegetable price shock that propelled CPI inflation to a 15-month high of 7.44 percent in July has reversed — the retail price of tomato, per data from the Department of Consumer Affairs, fell 62 percent month-on-month (MoM) in September and another 25 percent in October — rising onion prices prevented inflation from falling more sharply last month.
Onion prices rose 12 percent MoM in both September and October.
Other food items to see a sequential uptick in their prices in October include cereals (0.6-1 percent) and pulses (0.8-3.7 percent).
"Food prices seem to have firmed up on average in October once again, led particularly by onions this time," noted Kaushik Das, Deutsche Bank's chief economist for India and south Asia.
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"Despite a number of measures announced by the central government, onion prices in the domestic market continue to be high and the trend is likely to continue till the end of this month. A delayed start to the monsoon and unseasonal / patchy rainfall has led to this unfavorable price dynamic, which should reverse once the new harvest starts arriving in the market December onwards," Das added.
Edible oil prices, meanwhile, likely exerted downward pressure as they were largely lower last month.
| ORGANISATION | ESTIMATE FOR OCTOBER CPI INFLATION |
| Barclays | 4.6% |
| DBS Bank | 4.6% |
| HDFC Bank | 4.6% |
| Bank of Baroda | 4.65% |
| CareEdge | 4.7% |
| India Ratings | 4.7% |
| QuantEco Research | 4.75% |
| State Bank of India | 4.75% |
| Kotak Mahindra Bank | 4.8% |
| Societe Generale | 4.8% |
| Emkay Global Financial Services | 4.8% |
| Standard Chartered Bank | 4.85% |
| ICRA | 4.9% |
| IDFC First Bank | 4.9% |
| IndusInd Bank | 4.9% |
| Motilal Oswal Financial Services | 4.9% |
| Sunidhi Securities | 4.94% |
| YES Bank | 4.97% |
| L&T Finance | 4.98% |
| Nomura | 5.0% |
| DAM Capital Advisors | 5.09% |
| Piramal Enterprises | 5.17% |
On the whole, food and beverage inflation is expected to have come down in October from 6.3 percent in September, although the extent of its fall is under question, with estimates ranging from 5.3 percent to 6.2 percent.
Fuel inflation is expected to remain subdued.
Finally, core inflation — or inflation excluding food and fuel — may ease further to under 4.5 percent.
"Core inflation has reduced, but inflation in cost of essential services (health and education) remains," said Rahul Bajoria, managing director and head of EM Asia (ex-China) economics at Barclays.
"Input and output price PMIs (Purchase Managers' Index) for both the manufacturing and services sectors for October showed a rise MoM, particularly for inputs as firms cited higher raw material and labour costs, consequently passing it on to output prices. Whether it translates into hard data for core inflation bears watching, even as international energy and metal prices have retraced from September levels," Bajoria added.
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A headline print of 4.8 percent in October would mean inflation falling for the third straight month, with all but two of the 23 economists expecting it to be lower in October than it was in September. However, headline retail inflation is set to start a fifth consecutive year above the Reserve Bank of India's (RBI) medium-term target of 4 percent.
"On balance, we expect a prolonged pause on rates amid higher-for-longer global rates and tight domestic liquidity, keeping overnight rates elevated," noted Kanika Pasricha, economist at Standard Chartered Bank, who sees October CPI inflation at 4.85 percent, although she admitted a "slight upside risk" of it coming closer to 5 percent.
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"While we see a shallow 50 basis points rate-cutting cycle starting in June 2024, risks of a delay arise from oil price shocks and / or weather disruptions," Pasricha added.
The RBI has left the repo rate unchanged at 6.5 percent after hiking it by 250 basis points in 2022-23.
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