India’s consumer price index (CPI) inflation rose to 6.2% in October 2024, marking a 14-month high and exceeding the Reserve Bank of India’s (RBI) target range of 2-6%. The increase was mainly attributed to food and beverages, with a minor uptick in core inflation.

Aditi Nayar, Chief Economist and Head of Research and Outreach at ICRA, remarked, “The food and beverages inflation surged to 9.7% in October 2024, compared to 8.4% in September, led by an increase in seven of the 12 food groups. Vegetables inflation reached a 57-month high of 42.2% from 36.0% in September, exerting upward pressure on the overall CPI.”

Excluding vegetables, the headline inflation and food and beverages inflation were recorded at 4.3% and 3.6%, respectively, reflecting a milder trend. Core inflation, which excludes food, fuel, and other volatile components, rose to 4.0% in October from 3.8% in the previous month, marking its highest level since November 2023. Nayar noted that “core inflation is expected to continue to rise modestly through the rest of the fiscal year, while averaging below the 4.0% mark for the year.”

‘Supportive trends’

Agricultural indicators reveal some supportive trends for the ongoing rabi season. Reservoir storage across India was at 86% of full capacity as of 7 November, which is expected to assist rabi sowing. However, challenges persist in specific areas, including low di-ammonium phosphate (DAP) stocks and reservoir levels in states like Punjab, which could impact sowing progress and remain areas of focus for the season.

Looking ahead, ICRA projects that food and beverages inflation may ease to 8.0-8.5% in November from the October level of 9.7%, supported by a favourable base. Headline inflation, after peaking at 6.2% in October, is expected to moderate to between 5.5% and 5.7% in November.

“With CPI inflation exceeding 6% in October and potentially surpassing the MPC’s Q3 FY25 estimate by at least 60-70 basis points, a rate cut in the December policy review seems unlikely,” Nayar said. She added, “We anticipate that a modest rate cut cycle of 50 basis points may begin in February 2025 or later.”

Industrial Production expands 3.1% in September

India’s Index of Industrial Production (IIP) recorded a 3.1% year-on-year (YoY) growth in September 2024, rebounding from a slight decline of 0.1% in August. This improvement was broad-based across use-based categories, showing growth across all segments.

ICRA forecasts that October 2024’s YoY IIP growth is likely to fall within a range of 3.0-4.0%, with the early onset of the festive season and a high base of 11.9% in October 2023 balancing each other.

(This article was generated using the aid of AI and was reviewed by a journalist)

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