India's October Retail Inflation Accelerates To 4.48% YoY

India's annual retail inflation rose to 4.48% in October compared with 4.35% in the previous month, government data released on Friday showed. Analysts in a Reuters poll had predicted annual inflation at 4.32%.

COMMENTARY

RADHIKA RAO, ECONOMIST, DBS BANK, SINGAPORE

"October CPI inflation at 4.5% y/y registered a modest uptick from September, notwithstanding favourable base effects, validating our expectations that the lull in inflation seen in late-3Q was unlikely to last."

"Base effects have kept average CPI in Sept-Oct21 within 4-5% at the upper end of the RBI's target range, but the trend into late-2021 and 1Q22 is headed north on a pass-through of higher input prices, imported energy costs, narrowing output gap and seasonal bouts of food/perishables."

"While support measures like fuel excise cuts and import tax cuts offset part of the near-term pressures, the broad upside in inflation is likely to see the central bank prepare the ground for reverse repo rate hikes followed by a change in policy stance."

While the cut in excise duty on petrol/diesel will provide reprieve to inflation, high global commodity prices including energy prices, pose a threat for future inflation

RAJANI SINHA, CHIEF ECONOMIST & NATIONAL DIRECTOR OF RESEARCH, KNIGHT FRANK INDIA, MUMBAI

"While CPI is at a comfortable level around 4%, inflationary concerns persist with high core inflation. While the cut in excise duty on petrol/diesel will provide reprieve to inflation, high global commodity prices including energy prices, pose a threat for future inflation."

"Even with economies bouncing back to normalcy, some of the supply bottlenecks are still lingering, and to add to that there is the threat of demand side pressure on inflation gathering strength. Globally also the threat of inflation is surging because of supply bottlenecks and high commodity prices."

"While RBI will be cautious of inflationary threat, the central bank is likely to be gradual in its policy normalization under the current circumstances."

RUPA REGA NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCE HOLDINGS, MUMBAI

"I don't think the MPC of RBI will get any negative surprise from the deteriorated growth-inflation mix that was reported today. In fact, the RBI governor has been warning about the unevenness in economic growth and the rising tendency in core inflation."

"Based on today's prints, I expect the MPC to continue with the normalisation of liquidity at the same pace without raising the reverse repo rate in December 2021."

PRITHVIRAJ SRINIVAS, CHIEF ECONOMIST, AXIS CAPITAL, MUMBAI

"October CPI was a tad higher than expected with sequential price pressures seen in fresh food, fuel and transport components. Most core components have shown weaker sequential seasonally adjusted momentum except 'personal care & effects' where there is an increase in the pace of input price pass through."

"Input price pressure is likely to ease in the coming months on fuel tax cuts and normalisation in weather conditions. However, we see inflation remaining elevated near 5% over the next 18 months as normalization in activity sustains pass-through of already elevated input prices."

Input price pressure is likely to ease in the coming months on fuel tax cuts and normalisation in weather conditions

SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM

"Inflation in October came in higher than expected driven by higher food (especially vegetable) and fuel prices. That said, inflation still remains comfortable (at 4.5%) and India finds itself in a sweet spot compared to the rest of the world where inflationary pressures have risen significantly."

"We expect headline inflation to remain contained for the coming months, especially with the recent cut in excise duties. Although, core inflation could continue to remain elevated close to 6%, especially with the pick up in demand."

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"While the October inflation print was comfortably below 5% and perfectly in line with our expectations, near-term headwinds with respect to food price inflation owing to shortage of fertilisers remain a key upside risk to watch for."

"While the recent cut in excise duties and VAT offer near term respite, we would also be vigilant of the movement in global energy prices. We retain our FY22 CPI inflation projection of 5.4% with upside risks having become more pronounced."

VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI

"Build-up in sequential price pressures for food is less of a concern as of now as incoming kharif output and relief from the cut in excise duty on diesel could ease off the burden in the coming months."

"However, core price pressures continue to remain elevated and sticky on account of high input price inflation amidst gradual opening up of the economy. We continue to expect FY22 CPI inflation to be moderately higher at 5.6% vis-a-vis RBI's projection of 5.3%."

SREEJITH BALASUBRAMANIAN - ECONOMIST, IDFC AMC, MUMBAI

"The October headline and core CPI prints were in line with our expectation, with the major drivers being the stronger sequential pick up in food prices (particularly of vegetables), continued stickiness of the core basket and slightly higher housing price momentum."

"Vegetable prices warrant monitoring given the increase in real-time data this month too. While the direct impact of the fuel price cut will be visible from November, its indirect impact in the context of pressure on producer margins, services inflation and the trajectory of oil and other commodity prices will also be important."

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