India Retail Inflation Quickens to Highest Level in Over a Year
Food and beverage inflation accelerated 4.7 percent, led by a spike in vegetable prices.
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India’s retail inflation accelerated to the highest level in more than a year, possibly posing a challenge to the central bank’s aim of maintaining an easy monetary policy.
Consumer prices rose 3.99% in September from a year earlier, the Statistics Ministry said in a statement on Monday. That’s higher than the 3.8% median estimate in a Bloomberg survey of 37 economists and compares with a revised 3.28% increase in August.
Key Insights
- Food and beverage inflation accelerated 4.7%, led by a spike in vegetable prices. Onion and tomato -- key ingredients of Indian gravy -- soared after heavy monsoon rains damaged crops and reduced supplies. Fuel and light prices fell 2.18%, and clothing and footwear prices rose 0.96%
- Gains in consumer prices are in line the Reserve Bank of India’s 4% medium-term target, allowing it to focus on boosting growth through 135 basis points of easing so far this year
- Governor Shaktikanta Das said earlier this month that policy makers will “continue with the accommodative stance as long as it is necessary to revive growth while ensuring inflation remains within the target”
- Asia’s third-largest economy expanded 5% in the quarter ended June. That’s the weakest pace in six years, and prompted revisions in growth forecasts. The World Bank Sunday cut India’s growth projection to 6% -- even lower than the RBI’s revised 6.1%
What Economists Say
- Sameer Narang, an economist with Bank of Baroda, said any print that is closer to 4% makes it very difficult for the RBI to ease further because of the “conflicting signal that though the production is contracting, inflation isn’t coming down.”
- The RBI will be able to look at another price print before the December policy, he said
Get More
- Latest government data showed factory output contracted for the first time in more than two years in August, underlining the lack of momentum in the economy and supporting the case for the RBI to further ease policy
- Data earlier Monday showed wholesale price inflation easing the most in more than three years, suggesting producers lacked pricing power
- To get details of the statement on consumer price gains, click here
--With assistance from Tomoko Sato.
To contact the reporter on this story: Vrishti Beniwal in New Delhi at vbeniwal1@bloomberg.net
To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karthikeyan Sundaram
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