India’s retail inflation based on the Consumer Price Index (CPI) is likely to be in the range of 4.5 to 4.9 per cent. The Statistical Ministry will release the data at 5.30 pm on Monday.

The rate of inflation was 5.02 per cent in September, a three-month low. If the October reading falls below 5 per cent, it will be the fourth month in the calendar year that inflation has recorded a sub-5 per cent number. It will also give the Monetary Policy Committee (MPC) an extra cushion in its policy interest rate review. After hiking the rate by 2.50 per cent, the Committee has held rates steady four times, and is expected to do the same when meets next month.

Retail inflation in June rises to three-month high of 4.81%

The targeted inflation range is 4 per cent, with a 2 per cent movement in both directions. In an ideal situation, RBI would like to have retail inflation at 4 per cent. It surged 7.44 per cent in July this year causing some nervousness. However, it has eased after that.

Economists believe that though inflation has shown signs of further easing, vegetable prices led by onion remain a risk and may cause a spike in inflation in the coming months. Also, the first advance estimates of kharif production showed lower production of pulses, cereals and sugar (down 3-10 per cent YoY), which could signal that upward pressure on food prices may remain in the near term. At the same time, fluctuations in crude oil prices have the potential to disturb the entire inflation calculation.

However, the good news is that pump prices have not been revised for long, which has a direct impact on retail inflation. An important issue is that of stability in core inflation (headline inflation minus inflation of volatile items such as food and fuel)

Related Topics
comment COMMENT NOW