India's Inflation Set to Reach 5.81% Amid Rising Food Prices
India: Consumer price inflation in October is observed to be at a 14-month high of 5.81%, according to a Reuters poll of economists. This increase is primarily driven by rising food costs, particularly tomatoes and edible oils. Food prices, which comprise nearly half of India’s inflation basket, rose sharply as erratic rainfall disrupted production, leading to a significant spike in tomato prices. Additionally, a 20% increase in import taxes on edible oils in September contributed to the overall inflationary pressure, affecting household budgets.
The poll, conducted from November 4 to 8, included 52 economists and reflects a second consecutive monthly rise in retail inflation, which reached 5.49% in September. Forecasts for October ranged from 5.00% to 6.30%, with about a third expecting inflation to reach the Reserve Bank of India's (RBI) 6.0% tolerance threshold.
Broad-based price pressures are evident, with factors such as climate risks, a weaker rupee, and geopolitical uncertainties potentially contributing to further inflation increases. Core inflation, which excludes food and energy prices, is estimated at 3.60%, influenced by festive demand and rising gold prices. The RBI Governor has highlighted inflation risks, reducing the likelihood of a rate cut in December, though some economists predict a possible cut in early 2025 as inflation remains above the medium-term 4% target.
Source: Reuters