Sunday, June 13, 2021
News

Seasonal bottlenecks: October retail inflation expected to remain elevated

   SocialTwist Tell-a-Friend    Print this Page   COMMENT

New Delhi | Thursday, 2020 2:45:06 AM IST
Seasonal factors, along with Covid-19 induced supply-side constraints and growing demand on account of the festive season, are expected to keep India's retail price inflation at an elevated level, consequently, eroding chances of a RBI lending rate cut.

Leading economists have pegged the range of consumer price inflation numbers for October at around 7-7.5 per cent.

Besides, seasonal factors such as floods, industry watchers cited issues such as bottlenecks to transport, labour and working capital availability.

"CPI inflation is expected to come about 7.5 per cent with food inflation at around 9 per cent, as supply constraints continue to put pressure on vegetables and fruits prices," said M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings.

"There have been sharp increases in potato and onion prices due to floods in Maharashtra and northern Karnataka. Food inflation is likely to ease in the coming months with the arrival of new harvests coupled with the availability of a sufficient stock of pulses and foodgrains."

"Lower crude oil prices will also help ease fuel inflation."

Last month, official data showed that India's sequential retail price inflation spiked in September to 7.34 per cent from 6.69 per cent in August.

Though non-comparable, India had recorded a retail price inflation of over 3 per cent in the corresponding period of previous year.

Furthermore, data showed that India's consumer food price index during the month under review rose to 10.68 per cent against 9.05 per cent reported for August 2020.

The CFPI readings measure changes in retail prices of food products.

"The continuing firmness in vegetable prices among other food items indicate continuing inflationary pressures, which are likely to be further aggravated by the festival demand," said Acuite Ratings & Research's Chief Analytical Officer Suman Chowdhury.

"With WPI also showing a higher trajectory in the last month, there is a also a risk of a rise in core inflation. We believe that the likelihood of a material decline in CPI is low in the near term unless significant steps are taken to address the supply side challenges."

The data assumes significance as the Reserve Bank of India's monetary policy is based on keeping the retail inflation under control.

The Reserve Bank's target for retail inflation is set within a band of +/-2 per cent.

"The CPI data is expected to be unpleasant. We expect a further hardening to 7.6 in October 2020, ruling out a December rate cut," said Aditi Nayar, Principal Economist, ICRA.

The recent rise in retail inflation had led the RBI's MPC to hold the interest rates in August and October.

At the previous monetary policy committee meet, RBI Governor Shaktikanta Das said that there exists space for future rate cuts if the inflation evolves in line with the expectations.

In the minutes of the previous MPC meet, Das was quoted as saying: "With the supply side disruptions that are seen to drive the current inflationary pressures likely to be transient and wane out in months ahead as economy normalises, there is merit in looking through the current high levels of inflation and persevere with the accommodative stance for monetary policy as long as necessary to revive growth on a durable basis."

The MPC had decided to maintain the repo -- or short-term lending -- rate for commercial banks at 4 per cent.

(Rohit Vaid can be reached at rohit.v@ians.in)

--IANS rv/sn/vd

( 570 Words)

2020-11-11-20:58:03 (IANS)

 
  LATEST COMMENTS (0)
POST YOUR COMMENT
Comments Not Available
 
POST YOUR COMMENT
 
 
TRENDING TOPICS
 
 
CITY NEWS
MORE CITIES
 
 
 
MORE BUSINESS NEWS
India to require 400k charging stations ...
Byju's most valuable startup in India, 1...
International prices to help steelmakers...
Pak budget focuses on CPEC, employment, ...
Lumax Q4 revenue up 30 pc at Rs 504 cror...
India's auto demand to recover despite C...
More...
 
INDIA WORLD ASIA
Overcoming COVID vaccines hesitancy, tri...
V Hanumantha Rao urges Sonia Gandhi to s...
BJP leaders quit party over sedition cha...
Mission Uttarakhand: Cong to embark on P...
No one muzzled Bengal minister Amit Mitr...
Army dedicates 50-bed COVID hospital set...
More...    
 
 Top Stories
West Ham United manager David Moyes... 
Thunderstorm likely in parts of Har... 
Euro 2020: Denmark midfielder Chris... 
One injured in acid attack in Bihar... 
Merkel says discussed with Biden hi... 
Pakistan Embassy in Kabul closes co... 
Moscow Mayor announces new COVID-19... 
Pramod Sawant lauds efforts of Goa ...