Retail inflation surged to 5.49% in September, an increase from 3.65% in August.
India's retail inflation experienced a significant uptick in September, reaching 5.49% on an annual basis, up from a five-year low of 3.65% in August. This increase is attributed primarily to continued surges in vegetable prices, coupled with a lower year-ago base. Notably, this marks the first time since July that inflation has exceeded the Reserve Bank of India's (RBI) medium-term target of 4%.
The latest data reveals that food inflation, which constitutes over half of the Consumer Price Index (CPI) basket, climbed to 9.24% in September, a notable rise from 5.66% in the previous month.
In September, fuel and light inflation registered at -1.39%, indicating a contraction compared to the prior month's decline of 5.31%. Conversely, housing inflation accelerated to 2.78%, up from 2.66% in August, while inflation for clothing and footwear remained stable at 2.71%.
Dipanwita Mazumdar, an economist at Bank of Baroda, commented on the situation, stating, "September's reading will bear the brunt of a persistent spike in vegetable prices, particularly tomatoes and onions. Additionally, edible oil prices are gaining momentum due to rising international prices. Collectively, these factors are likely to exert upward pressure on headline inflation."
Saurabh Patwa, Head of Research and Portfolio Manager at Quest Investment Advisors, noted, "CPI inflation surged to 5.5% in September 2024, up from 3.7% in August, driven primarily by rising food prices, especially vegetables. Core inflation also increased to 3.5%, with higher crude oil, palm oil, and gold prices presenting potential risks."
As the inflation landscape evolves, these trends highlight the challenges faced by policymakers in managing price stability amid fluctuating commodity prices.
