India’s Retail Inflation : Highest Since January

Retail inflation jumped to its highest in eight months in September on the back of rising food prices. The Consumer Price Index-based inflation stood at 7.34% last month compared with 6.69% in August,according to data released by the Ministry of Statistics and Programme Implementation on Monday. A Bloomberg poll had forecast inflation at 6.9% in September. Inflation in the food and beverages category stood at 9.73%in September against 8.29% in August, led by higher prices of vegetables, pulses, meat and fish. This was the highest since January 2020. At 7.34%, inflation remained well above the Monetary Policy Committee’s target of 4 (+/-2)%. The panel, however, at its meeting last week said it will look through the current bout of high inflation as it’s mostly driven by higher taxes on petroleum products, increased transportation costs and disruptions in the food supply chain. It expects inflation to ease to 5.4-4.5% in the second half of the current financial year. CPI inflation hardened beyond our expectations to an eye-watering 7.34%, driven primarily by a further uptick in food inflation, said Aditi Nayar, principal economist at ICRA. Even though the high food inflation will eventually prove to be transient, with the favourable base effect and kharif arrivals to soon initiate a downward trajectory, the average inflation figures for FY21 as well as H2 FY21 are likely to be uncomfortably high, Nayar said.