Inflation in India will upsurge to 5.81% due to rising food prices

BENGALURU, Nov 8 (Reuters) – A Reuters survey of economists estimated consumer price inflation in India rose to a 14-month high of 5.81% in October, mainly driven by a jump in vegetable and edible oil prices, slightly below the central bank’s tolerable threshold of 6.0%.
Prices of food items, which make up nearly half of the inflation basket, likely rose more sharply last month. Tomatoes, a staple ingredient in every Indian kitchen, are expected to see double-digit price growth as uneven rains have disrupted production.
The government’s decision to hike import duty on edible oils by 20 per cent in mid-September also helped push prices higher, putting further pressure on household budgets.
Annual retail inflation, measured by the Consumer Price Index (CPI) (INCPIY=ECI), rose for a second consecutive month to 5.81% in October, the highest since August 2023, according to the median forecast of a November 4-8 Reuters poll of 52 economists. It rose to 5.49% in September, higher than forecast.
Estimates for the data, to be released at 1030 GMT on November 12, range from 5.00% to 6.30%, with nearly a third predicting inflation to reach 6.00% – the upper limit of the RBI’s 2%-6% target range – or higher.
The rupee on Thursday fell to its weakest level since Donald Trump’s victory in the US presidential election. The strengthening of the dollar and increasing pressure on the rupee could be an obstacle preventing inflation from coming down rapidly.
Core inflation, which excludes volatile items such as food and energy and is considered a better gauge of domestic demand, is expected to be 3.60% in October, according to the average estimate from a small sample of 21 people surveyed.
“Core commodities will also rise due to increased festive demand and higher gold prices,” Majumdar said.
The Indian statistical agency does not publish core inflation data. Economists had estimated it at 3.50% in September.
Reserve Bank of India Governor Shaktikanta Das on Wednesday highlighted upside risks to inflation, dampening immediate expectations of an interest rate cut. A majority in a separate Reuters poll expected the RBI to cut its key repo rate by 25 basis points to 6.25% in December.
However, inflation is not expected to return to the medium-term target of 4% until at least 2026, so economists in the survey warned that interest rate cuts could be delayed until early next year.
“I don’t think there is any certainty on how the rate cut cycle should play out… if you look at the RBI’s growth forecast, there is very little reason to support growth,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities.
The RBI has projected 7.2% economic growth this fiscal year, which some economists consider optimistic.
Besides, the wholesale price index-based inflation is also expected to have risen to 2.20% annualised last month from 1.84% in September, the survey showed.