According to data released on November 14 by the ministry of statistics and program implementation, India’s headline retail inflation rate fell to a three-month low of 6.77 percent in October, down from 7.41 percent in the preceding months.

The latest Consumer Price Index (CPI) inflation print of 6.77 percent is roughly in line with expectations. The Reserve Bank of India (RBI) expects inflation to fall as well. Governor Shaktikanta Das stated at an event on November 13 that the central bank saw CPI inflation falling below 7% in October.


Despite a significant drop in October, CPI inflation has now been above the RBI’s 2-6 percent tolerance limit for 10 consecutive months. In terms of the medium-term aim of 4%, CPI inflation has exceeded it for 37 months in a row.

Inflation Numbers

In October, CPI inflation fell due to a favorable base effect, which more than offset a 0.8 percent month-on-month increase in the CPI general index. The overall index has risen 1.4 percent month on month in October 2021, the foundation period for the most recent CPI inflation figure. If the index had not changed at all last month, indicating a lack of price impetus, inflation could have fallen as low as 5.9 percent.

However, an unchanged index appeared doubtful, as the statistics showed that the indices for each of the six groups of the CPI basket rose sequentially. While food inflation fell to 7.01 percent in October, down from a 22-month high of 8.6 percent in September, the food price index rose 1.1 percent month on month.

Ten of the 12 sub-groups of the CPI’s “food and beverage” group saw their index rise month on month. Vegetables experienced the greatest growth (4.1 percent), followed by spices (1.3 percent) and grains (1 percent). The sequential increase in the gasoline index, at 0.5 percent, was less than half that of the food index.

According to calculations, core inflation, or CPI inflation excluding volatile food and fuel categories, fell modestly to 6% in October from 6.1 percent in September. Despite a considerable drop in inflation in October, the RBI’s near-term interest rate choices might not change.

Data Explained

According to data issued by the Commerce Ministry, wholesale price index (WPI) inflation fell to a 19-month low of 8.39 percent in October, down from 10.7 percent in September. As a result, the MPC might raise the repo rate once again during its December 5-7 meeting.

In the last six and a half months, the RBI’s rate-setting panel has increased the repo rate by 190 basis points to 5.9 percent. However, there are indications that members are increasingly hesitant to continue raising the repo rate, with external member Jayanth Varma remarking in the minutes of the September 28-30 meeting that the committee “should now halt rather than focus on further tightening.”

Higher inflation (CPI) has been a source of concern for central banks around the world, including India, as the unpredictability of the Russia-Ukraine war exacerbated supply-side disruptions in a post-pandemic world still in the early stages of recovery from economic shocks.

On November 3, the RBI’s Monetary Policy Committee (MPC) met out-of-turn to debate and draught the report to be given to the federal government for failing to satisfy the CPI inflation mandate. The RBI is regarded to have failed in managing price hikes under the flexible inflation targeting framework implemented in 2016 if CPI-based inflation falls outside the 2-6 percent range for three quarters in a row.

According to RBI predictions, CPI inflation will fall to 6.5 percent in Q3 FY23 and 5.8 percent in Q4 FY23. The Commerce Ministry released figures for October wholesale pricing index-based inflation in India earlier today, which came in at 8.39% on an annual basis. With this, India’s wholesale inflation has broken its 18-month streak of being in double digits.

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