OCT RE­TAIL IN­FLA­TION TOUCHES 7-MONTH HIGH

Rises to 3.58% on in­crease in food prices

Business Standard - - FRONT PAGE - INDIVJAL DHASMANA

The Con­sumer Price In­dex-based in­fla­tion rate rose to this fi­nan­cial year’s high­est rate of 3.58 per cent in Oc­to­ber from 3.28 per cent in Septem­ber, with food and fuel prices in­creas­ing at a higher pace. The food in­fla­tion rate moved up to 1.9 per cent in Oc­to­ber from 1.25 per cent in Septem­ber.

Con­sumer Price In­dex (CPI)-based in­fla­tion rose to this fi­nan­cial year’s high­est rate of 3.58 per cent in Oc­to­ber, from 3.28 per cent in Septem­ber, food and fuel prices in­creas­ing at a higher pace.

This could stop the Re­serve Bank of In­dia (RBI) from cut­ting rates in its pol­icy re­view next month to spur fall­ing in­dus­trial growth even as core in­fla­tion (re­lat­ing to man­u­fac­tured prod­ucts sans food items) fell to 4.55 per cent, from 4.61 per cent.

How­ever, in­fla­tion in var­i­ous house­hold goods and ser­vices de­clined, im­ply­ing the goods and ser­vices tax (GST) did not have much im­pact. The GST Coun­cil’s re­cent de­ci­sion to cut the rates on around 200 items is likely to fur­ther dampen the rate of price rise of these items.

Food in­fla­tion moved up to 1.9 per cent in Oc­to­ber, from 1.25 per cent in Septem­ber. The main rea­son was veg­etable prices, with in­fla­tion in these up from 3.92 per cent to 7.4 per cent. Onions and toma­toes ap­pear the main causes. Else­where among food items, prices­moved in a nar­row range. Pulses con­tin­ued to show a fall in prices at a higher pace, of 23.1 per cent, com­pared to 22.5 per cent in Septem­ber. In­fla­tion in fuel and light was up at 6.36 per cent, from 5.56 per cent as global crude oil prices rose and de­spite the cut in ex­cise duty. The av­er­age price of the In­dian bas­ket of crude oil rose to $56.06 a bar­rel in Oc­to­ber, from $54.52 in Septem­ber.

In­fla­tion in house­hold goods and ser­vices such as health, trans­port and com­mu­ni­ca­tion, recre­ation & amuse­ment, and ed­u­ca­tion de­clined in Oc­to­ber. The RBI had pro­jected in­fla­tion to rise to 4.24.6 per cent in the sec­ond half (H2) of the fi­nan­cial year (Oc­to­ber to March). The rise in the In­dex of In­dus­trial Pro­duc­tion fell to 3.8 per cent in Septem­ber, from 4.2 per cent in Au­gust.

“With the CPI in­fla­tion ex­pected to track a ris­ing trend over H2 FY18 and print at around 4.5 per cent in March 2018, there is a low like­li­hood of rate cuts in the im­me­di­ate term. We ex­pect an ex­tended pause amid non-unan­i­mous vot­ing by the MPC in the De­cem­ber 2017 pol­icy re­view,” says Icra Prin­ci­pal Econ­o­mist Aditi Na­yar.

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