Driven by higher food prices, India’s retail inflation surged to 4.62 percent in October, breaching Reserve Bank of India’s medium-term target of 4 percent, latest price data released by the Central Statistics Office (CSO) on November 13 showed.
The inflation based on Consumer Price Index (CPI) was 3.99 percent in September and 3.38 percent in October 2018.
Core inflation (excluding food and oil) for October stood at 3.5 percent against 4 percent in September.
Food prices, which is a gauge to measure changes in kitchen budgets, grew 7.89 percent in October, against 5.11 percent in September. Inflation rate in cereals and products stood at 2.16 percent against 1.66 percent a month ago. Vegetables inflation for October stood at 26 percent against 15.4 percent in September.
Pulses and products recorded an inflation of 11.72 percent in October against 8.4 percent in September.
“Although headline CPI inflation in October 2019 has breached central point of RBI’s inflation targeting framework, the increase is due to seasonal items and strong base effect. With economic growth slowdown, India Ratings and Research believes growth concerns will dominate in RBIs monetary policy review and RBI to continue with accommodative policy and expect further rate cut in the policy review of December 2019,” India Ratings and Research said in a note.
India is in the throes of an economic slowdown. GDP grew 5 percent in April-June 2019, buffeted by weak household spending and muted corporate investment.
To combat the slowdown, Sitharaman in September had announced a cut in corporate tax rates, bringing it down to 22 percent from 30 percent for existing companies, and to 15 percent from 25 percent for new manufacturing companies.
Sitharaman on November 6 also announced that the Cabinet on approved the creation of a ‘professionally managed’ Rs 25,000 crore fund for boosting stalled middle and low-income RERA registered housing projects that are net worth positive.
The move is aimed to relieve financial stress faced by a large number of homebuyers and to also release funds stuck in these projects for productive use in the economy.
To boost growth, the Reserve Bank of India (RBI) in October slashed the primary lending rate by 25 basis points to 5.15 percent. This was the fifth consecutive rate cut since February.
The RBI also slashed its GDP growth estimate for the current fiscal to 6.1 percent from its earlier forecast of 6.9 percent during the August policy review.
The national income data have reinforced deceleration signs that were emanating from a slew of shop-end data, such as car and consumer goods sales, often seen as proxy indicators to gauge trends in household spending.
News Source:- Moneycontrol