Wednesday, 16 October, 2024
India's retail inflation rose to its highest level in nine months in September, primarily driven by surging food prices, according to government data released on Monday.
The annual retail inflation rate reached 5.49% in September, up from 3.65% in August and surpassing economists' expectations of 5.04%. This marks the highest inflation rate since December 2023, when it stood at 5.69%.
The Reserve Bank of India sees inflation easing after a few months of higher readings and expects it to average 4.5% in 2024-25, it said last week, when it changed its monetary policy stance to neutral and opened the door to rate cuts.
The central bank's inflation target is at 4%. The chart shows India's inflation growth was at a 9-month high of 5.49% yearly in September 2024.
Inflation of food, which accounts for nearly half of the consumption basket, rose to 9.24%, compared to 5.66% in August.
Vegetable prices rose 36% year-on-year in September against a 10.71% increase in August. The inflation rate for cereals was 6.84% in September compared to 7.31% in the previous month, while that for pulses was 9.89% against 13.6% in August. September's inflation surged sharply as the favourable base effect diminished, coupled with adverse weather conditions disrupting supply chains and driving up food prices, noted Garima Kapoor, an economist at Elara Securities.
A woman selects tomatoes from a vegetable vendor, at a wholesale market in Navi Mumbai, India August 4, 2023
RBI Governor Shaktikanta Das warned last week that significant inflation risks remain due to adverse weather, geopolitical tensions, and recent spikes in certain commodity prices.
The heat map illustrates the inflation rates of various components contributing to India's overall retail inflation.
Concerns over a potential widening conflict in the Middle East and possible disruptions to exports from major oil-producing nations have pushed global oil prices up to around $80 a barrel.
"Inflation uncertainties are likely to persist in the near term, especially with the recent rise in commodity prices, including vegetable oils," said Sakshi Gupta, an economist at HDFC Bank.
Unseasonal rains also pose a significant risk. India experienced above-average rainfall in September and is projected to see unusually high precipitation in October, potentially harming crops that are ready for harvest, such as rice, soybeans, and pulses.
Core inflation, which excludes volatile food and energy prices, was reported at 3.5%, compared to 3.3%-3.4% in August, according to two economists.
"The likelihood of a rate cut in December remains low and will depend on how commodity price pressures evolve," Gupta added, forecasting that inflation could drop back below 5% by the end of 2024.
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India's retail inflation rose to its highest level in nine months in September, primarily driven by surging food prices, according to government data released on Monday.
The annual retail inflation rate reached 5.49% in September, up from 3.65% in August and surpassing economists' expectations of 5.04%. This marks the highest inflation rate since December 2023, when it stood at 5.69%.
The Reserve Bank of India sees inflation easing after a few months of higher readings and expects it to average 4.5% in 2024-25, it said last week, when it changed its monetary policy stance to neutral and opened the door to rate cuts.
The central bank's inflation target is at 4%. The chart shows India's inflation growth was at a 9-month high of 5.49% yearly in September 2024.
Inflation of food, which accounts for nearly half of the consumption basket, rose to 9.24%, compared to 5.66% in August.
Vegetable prices rose 36% year-on-year in September against a 10.71% increase in August. The inflation rate for cereals was 6.84% in September compared to 7.31% in the previous month, while that for pulses was 9.89% against 13.6% in August. September's inflation surged sharply as the favourable base effect diminished, coupled with adverse weather conditions disrupting supply chains and driving up food prices, noted Garima Kapoor, an economist at Elara Securities.
A woman selects tomatoes from a vegetable vendor, at a wholesale market in Navi Mumbai, India August 4, 2023
RBI Governor Shaktikanta Das warned last week that significant inflation risks remain due to adverse weather, geopolitical tensions, and recent spikes in certain commodity prices.
The heat map illustrates the inflation rates of various components contributing to India's overall retail inflation.
Concerns over a potential widening conflict in the Middle East and possible disruptions to exports from major oil-producing nations have pushed global oil prices up to around $80 a barrel.
"Inflation uncertainties are likely to persist in the near term, especially with the recent rise in commodity prices, including vegetable oils," said Sakshi Gupta, an economist at HDFC Bank.
Unseasonal rains also pose a significant risk. India experienced above-average rainfall in September and is projected to see unusually high precipitation in October, potentially harming crops that are ready for harvest, such as rice, soybeans, and pulses.
Core inflation, which excludes volatile food and energy prices, was reported at 3.5%, compared to 3.3%-3.4% in August, according to two economists.
"The likelihood of a rate cut in December remains low and will depend on how commodity price pressures evolve," Gupta added, forecasting that inflation could drop back below 5% by the end of 2024.
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