The Borneo Post

India’s retail inflation rate drops, giving RBI breathing space

-

NEW DELHI: India’s retail inflation rate dropped sharply in October, giving the central bank leeway to allow easier lending policies, but plunging farm prices sent a stark warning to Prime Minister Narendra Modi about the challenges he faces in rural areas in next year’s general election.

The rate, which includes food and energy prices, dropped in October to 3.31 per cent on a yearon-year basis, the slowest pace in 13 months and remains below the Reserve Bank of India’s (RBI) medium-term target of 4 per cent for a third straight month.

The September inflation rate was a revised 3.70 per cent.

Inflation risks have ebbed after a fall in global crude oil prices by about 20 per cent since early October to around US$71 a barrel.

The rupee has also stabilised after a slide of more than 14 per cent in the first 10 months of this year, which has made it the worst performing Asian currency in 2018.

The RBI’s monetary policy committee unexpected­ly left the repo rate at 6.50 per cent last month when markets had expected a hike.

In October, the drop in consumer prices was mainly due to the fall in food prices, data released by the Statistics Ministry showed on Monday.

Analysts polled by Reuters had expected the October retail inflation rate would ease to 3.67 per cent, with estimates ranging from 3.23 per cent to 5.20 per cent.

A.Prasanna, chief economist at ICICI Securities Primary Dealership Ltd, said food inflation continues to be more benign than expected despite fears that some prices might spike as the government steps in to buy crops at higher prices.

“The Monetary Policy Committee will take comfort from headline and we expect a pause in December,” he said in reference to the chances the RBI would raise rates before the end of the year.

“We still expect a hike in February but will reassess the same given recent inflation prints and fall in oil prices,” added Prasanna. — Reuters

Newspapers in English

Newspapers from Malaysia