India's retail inflation eased in October on lower food prices, edging closer to the central bank's medium-term target of 4%, which it has said would need to be firmly in sight before it can start lowering rates.

Annual retail inflation fell 4.87% in October, down from 5.02% the previous month. A Reuters poll of 53 economists had forecast a rate of 4.80%.

Food inflation, which accounts for nearly half of the overall consumer price basket, rose 6.61% in October, compared with 6.56% in September.

 

COMMENTARY:

 

SUMAN CHOWDHURY, CHIEF ECONOMIST AND HEAD – RESEARCH, ACUITE RATINGS & RESEARCH

"Given the concerns on the yield in the upcoming kharif crop and the El Nino phenomenon, the downside risks to food inflation remain."

"We expect the headline inflation to average 5.6% in FY24 and remain in the band of 5.0%-5.5% in the second half of the fiscal (year)."

 

ADITI NAYAR, CHIEF ECONOMIST, ICRA, GURUGRAM

"The CPI inflation will climb to 5.6% by December 2023 and remain in a wide range of 4.9%-5.6% thereafter for the next two quarters before a particularly benign base effect temporarily dampens it in the second quarter of FY2025."

"We expect the MPC (Monetary Policy Committee) to maintain a hawkish tone amidst a status quo on the rates and stance in its upcoming policy meeting. We see the earliest likelihood of a rate cut in August 2024."

 

SUJAN HAJRA, CHIEF ECONOMIST AND EXECUTIVE DIRECTOR, ANAND RATHI SHARES AND STOCK BROKERS, MUMBAI

"As the overarching pattern of declining inflation persists, the central bank would find solace in an inflation rate that has now fallen below 5%."

"As a result of declining inflation and ongoing economic resilience, the Reserve Bank of India (RBI) will maintain the halt stance for the foreseeable future."

"We anticipate that inflation will fluctuate between 4% and 5% over the next twelve months. We, therefore, see little likelihood of any rate action occurring within this time frame."

 

DEVENDRA PANT, CHIEF ECONOMIST, INDIA RATINGS AND RESEARCH, GURUGRAM

"The decline in inflation, no doubt, is good news. However, the structural nature of food inflation, especially cereals, which have remained in double digits in the last 14 months, is a cause of concern. We expect the RBI to maintain status quo in forthcoming monetary policy."

 

MADAN SABNAVIS, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI

"The food price index remained virtually unchanged at 6.6%. This indicates stable inflation but does not provide any comfort from the monetary policy stance and a cautious approach would be the way forward. The kharif shortfalls would manifest in the coming months as the harvest is one month old now."

"Around 26% of the CPI witnessed high inflation in the food basket. The highest was for spices, pulses and cereals where it was in double digits. Eggs and fruits were other contributors to inflation."

"Edible oils provided a major decline to the inflation number at 13.7%. If this component is excluded, CPI would be as high as 5.6%."

"In the core inflation part, health and personal care continue to be pain points, with higher inflation numbers of 5.9% and 7.8% respectively."

"Across states, nine have inflation above the national average and varies from 2.5% in Delhi to 6.5% in Odisha. This is mainly due to variation in prices of food- especially pulses and fruits."

 

GARIMA KAPOOR, ECONOMIST, INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"Led by supportive base effect, India CPI inflation for October came in at 4.87% despite a sequential uptick in food prices that was led by protein items and vegetables. The continued subdued print of core inflation, however, offers respite and would allow the MPC room to maintain status quo through this financial year."

 

UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

"The CPI inflation came in line with our expectations. The moderation provides some relief, especially as core inflation has remained comfortable. However, we expect the trend of sub-5% headline inflation to remain brief with most of FY24 ahead likely to remain above 5%."

"Overall, we continue to expect the MPC to remain on an 'extended pause' phase in rates, with liquidity being used as a more frequent tool to manage the stance."

 

SAKSHI GUPTA, PRINCIPAL ECONOMIST, HDFC BANK, GURUGRAM

"CPI inflation moderated below 5% in October. However, it was higher than expected driven by a sequential increase in vegetables (particularly onions) and pulses inflation. Core inflation inched lower to 4.2%. Inflation could inch back up above 5% next month and food inflation continues to remain a concern." (Reporting by Milounee Purohit, Ashish Chandra, Ashna Teresa Britto, Rama Venkat and Nishit Navin in Bengaluru, and Ira Dugal in Mumbai; Editing by Savio D'Souza)