Inflation shoots up to a 7-month high of 3.58%
The country's retail inflation shot up to a seven-month high of 3.58 per cent in October on the back of higher increases in prices of food and fuel products, according to data released by the Central Statistics Office (CSO)on Monday.
The spurt in inflation has dampened the chances of an interest rate cut by the RBI in the monetary policy review on Dec 6. Industry was pinning hopes on a rate cut at a time when the economy is slowing down but with the spurt in inflation the RBI is likely to stick to a tight money policy.
CSO figures showed inflation for the food basket increased to 1.9 per cent in October. It was 1.25 per cent in September. The rate of price rise in the vegetable segment almost doubled to 7.47 per cent as against 3.92 per cent in September. Higher inflation was also observed in items like eggs and milk. However, fruits were comparably cheaper in October on a sequential basis. Prices of pulses declined by as much as (-) 23.13 per cent over October 2016. Fuel was costlier on a sequential basis as petrol and diesel prices have gone up. Higher inflation was also noted in the housing segment.
Crude prices have rallied in the international market, sending Brent crude above the 60 dollar per barrel mark, its highest since June 2015. This is a cause for concern as India imports close to 80 per cent of its crude oil requirement.
Some analysts expect the government's decision on Friday to slash tax rates on 178 items such as chocolates, detergents and cosmetics to 18 percent from 28 percent could marginally lower retail inflation in coming months.
"There is, however, a low likelihood of a rate cut by the RBI in the immediate term," said Aditi Nayar, an economist at ICRA, an Indian arm of the rating agency Moody's. The inflationary expectations could remain high in the second half of the fiscal year that ends in March, she added.
Retail inflation has been steadily rising since June, when it eased to 1.46 percent - its slowest pace since India started releasing such figures in January 2012, based on combined data for rural and urban consumers.
