India's Retail Inflation Accelerated To A Five-Month High In September

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India's Retail Inflation Accelerated To A Five-Month High In September
13 Oct 2022
min read

News Synopsis

Due to rising food costs, India's retail inflation accelerated to a five-month high of 7.30% in September, according to a poll, and continued to remain well above the Reserve Bank of India's (RBI) upper tolerance band for a ninth month.

Prices of basic commodities like cereals and vegetables, which make up the largest component in the inflation basket, have increased over the previous two years due to variable rainfall patterns and supply shocks from Russia's invasion of Ukraine.

India's poor and middle classes, already suffering from COVID-19 pandemic-related economic shocks, will be particularly affected by the rises as they spend a significant portion of their income on food.

The Consumer Price Index, which measures inflation, increased from 7.00% in August to 7.30% in September, according to poll conducted from October 3 to 7. That would be the highest since May 2022 if realized.

"There is a strong pressure from food that is playing out,"  according to to Dharmakirti Joshi, chief economist at Crisil.

The Indian government has implemented policies to control local costs, including some limitations on rice exports to curb inflation. However, consumer prices have resisted the RBI's upper tolerance limit this year and have continued to be stubborn.

Additionally not beneficial is a declining currency. A separate Reuters poll of FX analysts revealed that the damaged Indian rupee touched a fresh low of 82.32/$ on Friday and was anticipated to stay under pressure during the following six months.

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