India's retail inflation showed a welcome decline, reaching a 5-month low of 4.87% in October, as reported by the National Statistics Office on Monday. This figure is sequentially lower than the 5.02% recorded in September. The reduction in fuel prices, attributed to the government's decrease in LPG prices ahead of key state assembly elections and the upcoming Lok Sabha polls in the first half of next year, contributed to this relief for consumers.
Food inflation, constituting nearly half of the overall consumer price index (CPI), was at 6.71% in October, compared to 6.56% in September. The prices of edible oils dropped by 13.69%, and vegetable prices remained stable, providing relief to consumers. However, concerns persist about rising prices in certain categories, such as pulses (up by 18.79%) and spices (up by 22.76%). Cereals, including wheat and rice, also recorded a double-digit rise of 10.69%.
The current consumer price inflation is closer to the 4% midpoint of the RBI's 2-6% target range. This allows the central bank to maintain interest rates despite potential risks, such as uncertainties in global crude oil prices that could impact inflation. The decline aligns with the RBI's expectations, as it had kept its key interest rate unchanged to stimulate economic growth.
Nevertheless, economists advise caution due to the lingering effects of this year's erratic monsoon, which could impact food prices. Additionally, geopolitical tensions, such as the Israel-Hamas conflict, may influence oil markets and warrant monitoring.
(With Agency Inputs)
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