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India’s retail inflation surged to 5.49% in September, marking a sharp rise from 3.65% in August, the data by Ministry of Statistics and Programme Implementation (MoSPI) showed on Monday.
This nine-month high in inflation can be attributed largely to the combination of escalating food prices and the impact of both base effects and adverse weather conditions.
Inflation in rural areas stood at 5.87%, higher than the urban inflation rate of 5.05%.
A major driver of the inflation surge was food prices, which rose to 9.24%, compared to 5.66% in August. This spike in food inflation is particularly concerning, given that food constitutes a significant portion of household expenditure, especially in lower-income groups.
The rural and urban food inflation rates were 9.08% and 9.56%, respectively. The price increase in food commodities was largely driven by cereals, vegetables, and pulses, all of which experienced sharp rises in the aftermath of weather-related disruptions.
Housing inflation, which is compiled only for the housing sector also saw a moderate rise, reaching 2.78% in September, up from 2.66% in August.
RBI Governor Shaktikanta Das hinted about the surging inflation in september during his recent address during the Monetary Policy committee meeting outcome.
“A narrow segment of food articles continues to complicate India’s disinflation path, while non-food segments remain largely steady or lower. Based on the revised quarterly projections, the central bank is aware of this spurt as base effects fade and weather conditions are expected to drive an increase in perishable costs,” said Radhika Rao, Executive Director and Senior Economist, DBS Bank.
MPC is likely to adopt a forward-looking approach when deciding on the timing of a rate cut, also considering the GDP performance for Jul-Sept ahead of the next policy review. We expect the strong finish of the monsoon to bode well for the harvest and moderate food prices toward the end of 2024, supporting the central bank’s shift toward easing, Rao added.
Ministry of Commerce & Industry also announced the numbers for Wholesale Inflation that accelerated to 1.84% in September.
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