New Delhi: In sync with retail inflation, India’s wholesale inflation accelerated to a six-month high of 3.59% in October, from 2.6% a month ago, on the back of rising vegetable prices.
Vegetable prices increased 36.6% in October, leading to food inflation more than doubling to 4.3% in the same month. Fuel inflation also rose by 10.5% in October from 9% in September as international crude oil prices hardened. However, inflation for manufacturing items eased to 2.6% in October from 2.7% a month ago.
Government data released on Monday showed India’s retail inflation quickened to 3.58% in October, the fastest pace in seven months, spurred by rising food and fuel prices, virtually ruling out the possibility of an interest rate cut by the Reserve Bank of India (RBI) in its 6 December monetary policy review.
“Inflation rising from last month’s levels largely on account of food especially vegetables and protein products. Hopefully, increasing trend proves to be seasonal, and we will continue to have sub-4% inflation," economic affairs secretary Subhash Chandra Garg tweeted on Tuesday.
RBI has raised its retail inflation target to 4.2-4.6% for the second half of this fiscal year from 4-4.5%, reflecting the combined impact of unfavourable base effects, the upturn in food prices and the impact of the increase in house rent allowance announced by the central government.
Indicating the adverse macroeconomic impact of the rise in crude oil prices, global financial services company Nomura Holdings Inc. said every $10 per barrel rise in the price will worsen India’s retail inflation by 0.6-0.7 percentage points and the current account balance by 0.4 percentage points of gross domestic product (GDP).
Crude oil price of the Indian basket stood at $62.66 per barrel on Monday
Madan Sabnavis, chief economist at Care Ratings, said rising global crude oil prices will pressurize domestic price levels in coming months. “Further, an increase in excise duty on transport fuels (petrol & diesel) last month would add to inflationary pressure in transport fuels in the coming months. We expect WPI inflation to be around 3.5-4% by the end of the fiscal year," he added.
The GST Council’s decision on Friday to cut the tax rate on 177 items from 28% to 18%, leaving only 50 items under the highest tax slab, is expected to partially ease inflationary pressure on consumers as and when companies start passing on the benefits by cutting prices.