Retail Inflation Likely To Have Slowed To 6.7% In October From 7.4% In September: Report

The retail inflation, which has been above the RBI’s target level of 4 per cent (+-2), is likely to have slowed to 6.7 per cent in October after touching a five-month high of 7.41 per cent in September. According to a Moneycontrol poll of 16 economists, thanks to a favourable base effect, the headline retail inflation likely dropped sharply in October.

The Ministry of Statistics and Programme Implementation will release retail inflation data for October at 5.30 pm on November 14 but before that, it will release the industrial production data for September on November 11.

According to estimates of 14 economists polled by Moneycontrol, the industrial growth, as measured by the Index of Industrial Production (IIP), might have also risen to 2.3 per cent in September from August’s 18-month low of (-)0.8 per cent.

Kanika Pasricha, an economist at Standard Chartered Bank, said, according to Moneycontrol: “While a fading of unfavourable base effects was likely the primary driver, the performance of lead indicators also improved—both exports and core sector growth picked up month on month, and auto production growth stayed strong.”

The RBI in its Monetary Policy Statement of September 30, 2022, has projected the retail inflation to come in at 6.5 per cent in 3QFY23, 5.8 per cent in 4QFY23 and 5 per cent in 1QFY24. Ind-Ra also expects the retail inflation to fall to 6.3 per cent in 3QFY23 and 6.5 per cent in 4QFY23 from 7 per cent in 2QFY23.

The RBI has raised 190 basis points since May this year. In May, the central conducted its off-cycle monetary policy review to hike the repo rate to control inflation. It had hiked 40 basis points in the review.

India’s retail inflation accelerated to a five-month high of 7.41 per cent in September. It was the ninth month that the Consumer Price Index (CPI)-based inflation has remained above the RBI’s upper tolerance limit of 6 per cent, and has risen despite the central bank’s efforts to curb it. The retail inflation had stood at 7.04 per cent in May, 7.01 per cent in June, 6.71 per cent in July, 7 per cent in August and now 7.41 per cent in September.

The RBI’s Monetary Policy Committee last week (November 4) meet under Section 45ZN of the RBI Act, 1934 (which deals with failure to maintain the inflation target). The meeting was to discuss and draft a report for the government on why the central bank has failed to keep retail inflation below the target of 6 per cent for three consecutive quarters since January this year.

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