India’s Retail inflation in October falls to 6.77%

India’s retail inflation, measured by the Consumer Price Index (CPI), dropped sharply to 6.77% year-on-year in October 2022 from 7.41% in September 2022. According to the Reserve Bank of India (RBI), inflation has exceeded 6% for the tenth straight month. According to official data, rural inflation in October 2022 decreased to 6.98%, while urban inflation fell to 6.50%.

Statistical data from the National Statistical Office (NSO) show that food inflation was 7.01% as opposed to 8.6% in September; vegetables inflation was 7.7%; fuel and light inflation was 9.93% as opposed to 10.39%.

The central bank’s Monetary Policy Committee (MPC) held its meeting earlier this month to discuss sending an explanation to the government regarding its inability to meet three consecutive quarters of targets.

The RBI Governor Shaktikanta Das had expected the inflation to be lower than 7% in October.

There has been a slowdown in headline inflation due to a favorable base effect. However, supply-chain issues due to geopolitical developments and rising commodity prices continue to drive inflation.

Since May this year, the RBI has raised the benchmark repo rate by 190 basis points. In May, the central bank conducted an offcycle monetary policy review that saw the repo rate raised by 40 basis points. The next meeting of the RBI MPC is scheduled for December 5-7, 2022.

Despite a nascent recovery from economic shocks, inflation has been a concern for central banks around the world, including India. This is primarily due to Russia’s invasion of Ukraine, which resulted in disruptions in supply chains.

According to the RBI estimates, inflation is expected to come down to 6.5% in the third quarter of fiscal 2022-23 and 5.8% in the last quarter, The Ministry of Commerce released data for India’s wholesale price index-based (WPI) inflation for October which came in at 8.39% year-on-year, a drop below double digits for the first time since March 2021 when it was at 7.89%.

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