October retail inflation drops to four-month low of 4.87%

Cereals inflation stood at 10.65 per cent in October, continuing to be in double digits for the second month in a row. There is a growing trend of inflation in egg, fruits, pulses and products, which recorded inflation rates of 9.30 per cent, 9.34 per cent and 18.79 per cent, respectively, in October as against 6.42 per cent, 7.30 per cent and 16.38 per cent in September. Vegetables inflation, however, provided relief by easing to 2.7 per cent in October from 3.39 per cent in September. The decline in retail inflation rate in October was mainly driven by non-food items. Core inflation — non-food, non-fuel segment — eased marginally to 4.4 per cent in October from 4.6 per cent, reflecting weakening of demand, economists said.

The data put out by the National Statistical Office.

Fuel and light group recorded deflation of 0.39 per cent in October as against deflation of 0.11 per cent in September, reflecting the impact of the cut in cooking gas prices and no change in pump prices of diesel and petrol. Miscellaneous inflation, representing services mainly, also moderated to 4.40 per cent in October from 4.77 per cent in the previous month. The overall retail inflation rate in October was higher at 5.12 per cent in rural areas than 4.62 per cent in urban areas. Food inflation for rural areas was 6.58 per cent in October, lower than 6.63 per cent in urban areas. Going ahead, weak prospects for Kharif harvest and Rabi sowing are expected to impact food prices along with a low base effect which will also push up inflation rate in November.

“Going forward, below par monsoon rainfall is likely to have its impact on cereals inflation, this along with pulses inflation is expected to keep food inflation elevated. Food inflation has potential to push retail inflation higher as witnessed in July and August 2023,” Devendra Kumar Pant, Chief Economist & Senior Director – Public Finance, India Ratings and Research said.

“Another risk to retail inflation is from commodity prices, which presently are low and due to a freeze in pump prices of petrol and diesel fuel and lights and transport and communications is low. The core inflation which has declined to 43-month 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. We expect RBI to maintain the status quo in its forthcoming monetary policy and may remain in status-quo mode for the rest of FY24,” he added.