Retail inflation rises to 5% in Oct on dearer food items

In October 2014, the retail inflation was 4.62%.

Analysts said inflation may moderate once festival demand softens and prices of lentils and vegetables fall as imports increase.

India’s annual consumer price inflation (CPI) edged up to 5% in October, up for the third straight month, compared with 4.41% a month ago, government data showed on Thursday.

In the case of inflation derived from the Consumer Price Index for October, the rural areas saw a much higher price rise of 5.54 percent, as against 5 percent in the urban areas.

“The uptick in inflation, if any, related to the festive demand, would dissipate over the next month”, said Aditi Nayar, an economist at ICRA, the Indian arm of Rating Agency Moody’s. Retail inflation in pulses and products category rose to a staggering 42.20% in October.

India’s central bank RBI estimates retail inflation to be at 5.8% by January 2016.

While the industrial production growth was lower on account of a dip in manufacturing index, the inflation rate moved up due to sharp increase in the prices of food articles in general and those for pulses in particular, as per the separate sets of data released by the ministry of statistics and programme implementation. However, among other protein rich items such as meat and fish, the rate of price rise has slowed to 5.01%. However, electricity production bucked the trend, rising 11.4% in September, stronger than the 5.6% increase in August.

“While we rule out an interest rate cut in December we do see a few room opening up for an additional rate cut between January and September next year”, she said.

Industrial output INIP=ECI, however, likely slowed to 4.7 percent in September compared with a year earlier and from a 6.4 percent rise in the previous month.