Food pushes India's retail inflation to nine-month high in September

NEW DELHI, Oct 14 (Reuters): India's retail inflation in September accelerated to its highest in nine months, due to higher food prices, according to government data released on Monday.
Annual retail inflation was at 5.49 per cent in September, higher than 3.65 per cent in August, and economists' forecast of 5.04 per cent.
The print was the highest since December 2023, when retail inflation was at 5.69 per cent.
The Reserve Bank of India sees inflation easing after a few months of higher readings and expects it to average 4.5 per cent in 2024-25, it said last week, when it changed its monetary policy stance to neutral and opened the door to rate cuts.
The central bank's inflation target is at 4 per cent.
The chart shows India inflation growth was at 9-month high of 5.49 per cent on yearly basis in September 2024.
Inflation of food, which accounts for nearly half of the consumption basket, rose to 9.24 per cent, compared to 5.66 per cent in August.
Vegetable prices rose 36 per cent year-on-year in September against a 10.71 per cent increase in August.
The inflation rate for cereals was 6.84 per cent in September compared to 7.31 per cent in the previous month, while that for pulses was 9.89 per cent against 13.6 per cent in August.
September inflation rose sharply as the favourable base effect waned, while unfavourable weather conditions disrupted supply chains pushing up food prices, said Garima Kapoor, economist at Elara Securities.
RBI Governor Shaktikanta Das warned last week that significant risks to inflation persisted from adverse weather conditions, geopolitical conflict and the recent increase in some commodity prices.
The heat map shows the inflation of various components of India's retail inflation
Fears of a widening Middle East conflict and potential disruption to exports from the major oil-producing nations have pushed global oil prices higher to around $80 a barrel.
"Inflation uncertainties continue to persist in the near-term, particularly with the recent rise in commodity prices like vegetable oils," Sakshi Gupta, economist at HDFC Bank, said.
Unseasonal rains could prove to be a risk as well.
India received above-average rainfall in September, and is forecast to witness unusually high rainfall in October, potentially damaging crops ready for harvesting such as rice, soybeans and pulses.
Core inflation, which strips out volatile food and energy prices, was 3.5 per cent as against 3.3 per cent-3.4 per cent in August, according to two economists.
"The chances of a December rate cut at this stage remain low and are likely to hinge on how commodity price pressures evolve," HDFC Bank's Gupta said.
She forecast inflation falling back below 5 per cent by the end of 2024.
Meanwhile, India's wholesale price index based inflation rose to 1.84 per cent in September on the back of higher food prices.
The September print was lower than the 1.92 per cent increase projected by economists in a Reuters poll and up from 1.31 per cent in August, according to government data released on Monday.
Food prices rose 9.5 per cent year-on-year in September, compared to a 3.26 per cent rise in August. Vegetable prices rose 48.7 per cent, compared to a drop of 10 per cent in August. Cereal prices rose 8.1 per cent over last year from an 8.4 per cent increase a month ago. Prices of manufactured products rose 1 per cent against a 1.2 per cent rise in the previous month.
Fuel and power prices dropped 4 per cent from a 0.7 per cent drop in August.
Last week, the Reserve Bank of India (RBI) left key interest rates unchanged but tweaked its stance to "neutral", opening the door for rate cuts amid early signs of a growth slowdown in the economy.
However, a widening conflict in the Middle East has pushed global oil prices hovering near $80 a barrel and that could fan inflation in India, which is the third-largest oil importer and consumer.