Higher food prices accelerate retail inflation in October

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SME Times News Bureau | 14 Nov, 2017
Food, fuel and housing prices pushed India's annual retail inflation rate higher in October, official data showed on Monday.

According to the data furnished by the Ministry of Statistics and Programme Implementation, October's consumer price index (CPI) inflation rose to 3.58 per cent from 3.28 per cent in September.

However, on a year-on-year (YoY) basis, the CPI inflation last month was lower than 4.20 per cent recorded in October 2016.

The overall food prices, as gauged by the Consumer Food Price Index (CFPI), rose to 1.90 per cent during the month under review from 1.25 per cent in September 2017.

The YoY CPI in urban areas ruled higher at 3.81 per cent, while in rural India it rose by 3.36 per cent.

As per the ministry's data, retail inflation on a YoY basis edged higher due to a rise in the prices of food items like vegetables, milk-based products, cereals, meat and fish.

The data on a YoY basis showed that vegetables in October became costly by 7.47 per cent, while prices of milk-based products rose by 4.30 per cent.

Other notable categories such as cereals became dearer by 3.68 per cent and meat and fish recorded a rise of 3.12 per cent.

Sub-category of food and beverages during the month under consideration recorded a rise of 2.26 per cent over the same period last year.

Soumya Kanti Ghosh, Group Chief Economic Adviser of the State Bank of India, said in the SBI Ecoflash report: "Compared to September 17, the increase in food, fuel and housing prices contributed to the increase in overall inflation. Within food inflation, the price of vegetables, milk and milk products contributed to the increase.

"Firming up of crude prices has led to increase in fuel inflation to 6.36 per cent in October 17 from 5.56 per cent in September 17. However, cut in excise duty announced by the government tempered the price increase in fuel."

Commenting on the Reserve Bank of India's (RBI) expected reaction to the inflation numbers released before its monetary policy review meet on December 6, Jaikishan J. Parmar, Research Analyst at Angel Broking, said: "Firstly, the CPI inflation is still well within the RBI comfort zone of 4 per cent. Secondly, the GST Council has drastically cut the GST rates... that is likely to have a subduing effect on retail inflation in the coming months. However, the RBI rate decision may still predicate on the Fed trajectory."

Ratings agency Crisil said: "In the months ahead, inflation could see an upside from further rise in oil prices and higher household spending led by implementation of farm loan waiver and an expected upward revision in salary and allowances of state government employees."