Guwahati: Retail inflation in India spiked to a nine-month high of 5.49% in September, primarily driven by soaring food prices and changes in the base effect.
This marks a sharp rise from the five-year low of 3.65% recorded in August and represents the first time inflation has exceeded the Reserve Bank of India’s (RBI) 4% target since July.
Economists are warning of potential risks to economic stability as inflationary pressures intensify.
The state of Assam has also been impacted, with its inflation index climbing to 196.9 in September from 187.8 a year ago, reflecting the rising costs of goods and services.
Economists explain that while the base effect initially kept inflation lower in July and August, its shift in September exacerbated price pressures.
Despite the recent surge, inflation remains within the RBI’s tolerance range of 2-6%. However, food inflation, which constitutes nearly half of the Consumer Price Index (CPI) basket, surged to 9.24% in September from 5.66% in August, raising concerns about affordability.
Inflation in rural areas rose to 5.87%, while urban inflation reached 5.05%. The sharp rise in vegetable prices—35.99% in August from 10.71% in July—due to weather disruptions further amplified inflation, although pulses saw a slight easing, with inflation dipping to 9.81%.
On the other hand, inflation for fuel and light declined to -1.39%, while housing inflation edged slightly higher. Clothing and footwear prices also saw moderate increases.
The RBI, during its Monetary Policy Committee (MPC) meeting in October, maintained its retail inflation forecast at 4.5% for the 2024-25 fiscal year.
RBI Governor Shaktikanta Das underscored the need for vigilance in managing inflation, comparing it to a “horse” that requires careful handling to remain on target.
While the central bank held interest rates steady and shifted its policy stance to ‘neutral,’ experts caution that food price volatility, particularly in key commodities like tomatoes and onions, poses ongoing challenges.
The MPC’s future decisions are expected to hinge on upcoming economic data, with hopes that a favorable end to the monsoon season will help stabilize food prices by late 2024, easing inflationary pressures.
As India navigates this inflationary period, both policymakers and the public remain alert to the broader economic impacts.
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