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Last Updated : Nov 12, 2018 08:39 PM IST | Source: Moneycontrol.com

Retail inflation softens to 3.31% in October versus 3.7% in September

Retail inflation, measured by Consumer Price Index (CPI), stood at 3.58 percent in September last year.

Shreya Nandi @shreyanandi15

India’s retail inflation eased to 3.31 percent in October, lowest in a year, as compared with 3.70 percent in September, driven by cheaper food items, data released by the government showed.

Retail inflation, measured by Consumer Price Index (CPI), stood at 3.58 percent in October last year.

CPI is the main price gauge that the Reserve Bank of India (RBI) tracks.

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According to central banks’ latest estimate, retail inflation is projected at 3.7 percent in the July-September quarter, 4.8 percent in the January-March quarter and 3.8-4.5 percent during October-March of 2018-19.

As per minutes of the Monetary Policy Committee meeting held in October, RBI Governor Urjit Patel said the inflation outlook continues to face several upside pressures, which includes uncertainty surrounding impact of increase in minimum support prices (MSP) of Kharif crops on food inflation, surge in crude oil prices, increased heightened volatility in financial markets of emerging economies, among others.

There is also a risk of fiscal slippage at the Centre or state level, Patel has said.

A lower rate of inflation for October amid softening crude oil prices and relatively stable domestic currency lowers the possibility of a rate hike by the central bank.

Consumer food price index witnessed disinflation, recording de-growth of 0.86 percent, from 0.51 percent in September and 1.90 percent a year ago, mainly driven by cheaper vegetables, fruits, pulses and sugar.

Prices of vegetables grew -8.06 percent versus (-) 4.15 percent a month ago. Similarly, prices of fruits fell further, witnessing 0.35 percent growth in October as compared with 1.12 percent in September.

Pulses continued witness deflation and contracted (-) 10.28 percent in October from (-) 8.58 percent a month ago.

Despite lower inflation, experts feel the sequential hardening in the core inflation or non-food, fuel inflation, driven by miscellaneous items may pose some concern.

“Core inflation rose to an uncomfortably high 6.1 percent in October 2018, led by services such as health, as well as the impact of commodity prices on the inflation for transport and communication, household goods and services, and personal care and effects, in sharp contrast to the YoY disinflation in food items,” Aditi Nayar, Principal Economist at ICRA said.

Fuel and light inflation for October was at 8.55 percent compared to 8.47 percent month on month, which housing inflation was 6.55 percent versus 7.07 percent MoM.

Going forward, experts also expect the headline inflation to remain benign given the recent downturn in oil prices, stability in the rupee and mild inflation prints.

“The next inflation print could be even lower. We are however, concerned at the extreme food disinflation,” B Prasanna, Group Executive and Head - Global Markets Group, ICICI Bank.

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First Published on Nov 12, 2018 05:37 pm
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