Retail Inflation in India at 4.62%, 16 Month High

India’s Ministry of Statistics and programme implementation released data on retail inflation in India for the month of October. The estimated data based on consumer price index (CPI) showed a 16 month high inflation of 4.62% in retail price rise. Consequently, this data breaks the comfort zone of under 4% maintained by Reserve Bank of India. Primarily, this inflation is assumed to the effect of spurge in domestic produce prices.

The Inflation

In September, inflation of 14 months high of 3.99% was observed which was within the comfort zone of RBI. Similarly, consumer Price Index-based inflation was at 3.28 per cent in August and 3.70 per cent on September 2018. On the contrary, in July the inflation stood at 4.17%. Further, excluding the food produce the core inflation dropped from 4% to 3.5% in October. For instance, the industrial output was at 4.3% in September, lowest in 8 years.

Apart from this there is a growing deviation between retail and wholesale inflation indices. Therefore, the wholesale inflation stooped down to 0.33% in September. Additionally, the wholesale inflation for October is a 40- month low. While, retail inflation in India for the same month stood at 16 month high. This essentially depicts that the prices are deviated in accordance with marginal rate at the wholesale level. However, retail prices are growing every month irrespective of the trend.

Reasons for Price Increase

The significant increase in costs of vegetables and pulses have provoked the inflation. For instance, vegetables price spiked up-to 26.1% in October 2019, particularly onion price levitated around Rs 80 against the previous month’s Rs 55 price range. Whereas, pulses prices were 11.72% higher. Moreover, meat and fish (9.75%), beverages (6.93%), egg and FMCG faced a similar rate spike. Another major factor affecting the inflation is the heavy rainfall in Maharashtra, West Bengal, Odisha and other states of India. Following the downpour, the rainfall disrupted several crops thereby reducing supply and increasing demand.

Focusing on the Right Stance

The inflation rate estimated to remain the same for the next few months. As per expert opinion, retail inflation in India might go higher in November due to unfavourable support. RBI interference with rate cut solution might solve the growing inflation. Even after government interference with extreme tax cuts there wasn’t any major improvement in the economy of India. Its important to focus on the growth of the nation rather than the slight distress due to inflation. However, it is equally important to address the current scenario as this is a hurdle in economic advancement of the country.

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