1 min read.Updated: 12 Nov 2020, 06:29 PM IST Written By Anulekha Ray
CPI has soared high to 7.61 %, in Oct, with food inflation moving upwards of 11%
The Consumer Food Price Index (CFPI) jumped to 11.07% in October
India's retail inflation rose to the highest in more than six years on account of elevated food prices. According to Consumer Price Index (CPI) data released by the Ministry of Statistics and Program Implementation, inflation stood at 7.61% in October — the highest since May 2014. Retail inflation recorded at 7.27% in September, according to data. The Consumer Food Price Index (CFPI) jumped to 11.07% in October, up from 10.68% in September.
The main factor leading to higher inflation was elevated food inflation. In October, inflation in meat and fish rose to 18.7% while vegetable prices increased to 22.51%.
"Food prices do not seem to be moderating contrary to earlier expectations, and from just fruits and vegetables the price surge has moved to all the major food components as well. This may have an impact on the trajectory of interest rates, and RBI may have to continue to focus on liquidity provision rather than rate action. It is also a fact that the economy is going through unprecedented economic developments and therefore one may expect a relatively higher price level. But persistently high inflation could invite action from the RBI by way of even reducing the free liquidity," Joseph Thomas, Head of Research - Emkay Wealth Management said.
"High food inflation despite easing restrictions and improving mobility numbers indicates the problem is more complex and likely to persist in the near future," said Anagha Deodhar, economist at ICICI Securities.
The Reserve Bank of India, which mainly factors in retail inflation while arriving at key policy rates, has been mandated by the government to keep inflation at 4 percent (+, - 2%).
India’s economy probably shrank for a second straight quarter, according to a team of economists, pushing the country into an unprecedented recession. Gross domestic product contracted 8.6% in the quarter ended September, the Reserve Bank of India showed in its first ever published ‘nowcast'. The economy had slumped about 24% in April to June.
With coronavirus restrictions largely eased, September industrial output grew for the first time in six months at 0.2%. For the April-September period it contracted 21.1%. "The IIP is almost flat at 0.20%, from a deeply negative number for the period before that there is some economic recovery happening at present, but the price level too is rising. To sustain the early gains in recovery control of the price level is critical," Thomas added.