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BUSINESS EYE OCTOBER 14, 2022 | The Indian Eye 40

Another hike on repo rate on

the cards as retail inflation jumps to

five-month high

The burden of inflation is more on the poor as the price of essential items, such as food

and fuel, occupy a greater share in the consumption basket of lower income classes

OUR BUREAU
New Delhi/Mumbai

he Reserve Bank of India (RBI) may be
forced to raise repo rate yet again in Decem-
Tber with retail inflation rising to 5-month
high of 7.41% in September, mainly on account
of rising food prices. India’s retail inflation stood
at 7% in August. Food inflation, which comprises
almost 40% of inflation basket, accelerated sharply
to 22-month high of 8.4% in September from 7.6%
a month ago. This was mainly due to rise in price of
cereals, vegetables, pulses and milk.
Sequentially, headline inflation rose by 0.6%
(August: 0.5% mom) led by food and beverages
inflation (0.9% mom). “The sequential pickup was
largely due to vegetables, cereals, spices, meat and
fish, and pulses. High frequency data continues to
show upside to prices of cereals, pulses, and veg-
etables.
Meanwhile, fuel and light inflation moderated
to 10.4% (August: 10.8%) but increased sharply
by 0.4% month-on month. Rural and urban in-
flation also increased by 41 and 55 bps to 7.56%
and 7.27%, respectively. September core inflation
(CPI excluding food, fuel, pan, and tobacco) in-
creased by 9 bps to 6.26%. Sequentially, core infla- A vendor sells tomatoes at a wholesale vegetable market in Amritsar.
tion moderated to 0.32%. Clothing and footwear Retail inflation has risen due to a sharp rise in food prices (ANI)
increased to 10.2%, followed by household goods
and services at 7.68% (7.53%), while moderation
was visible in recreation, and personal care and 5.5% previous year,” it added. upside relative to our estimate of 7.2 per cent be-
effects Moreover, amid this rising inflation pressure, ing primarily driven by food inflation,” said Aditi
This is the eighth straight month when infla- the RBI is expected to hike benchmark lending Nayar, Chief Economist, ICRA.
tion figures have remained above the RBI’s tol- rates further, thereby adding to the financial bur- Food inflation spiked to a 22-month high of
erance band of 2-6%. The RBI has been tasked den of the common people. 8.4 per cent in September 2022, with a sharp se-
by the government to keep inflation in the 2-4% The price rise has been sharper in rural India. quential up move in vegetables, cereals and spices.
range, with a margin of 2% on each side. Since the CPI-based inflation in rural India surged to 7.56 The excessive rainfall in early October 2022
RBI has officially missed its inflation target for the per cent in September while for the urban India it may adversely impact the kharif harvest and delay
third successive quarter, it will have to write a let- stood at 7.27 per cent. The headline inflation has rabi sowing, thereby posing a material upside risk
ter to the government explaining the reasons for been above the RBI’s mandated tolerance range to the food inflation outlook. However, the impact
its failure and the steps it will take to correct this. of 2-6 per cent for three consecutive quarters. Un- of the same on the YoY food inflation prints is
According to Crisil, the burden of inflation is der the flexible inflation targeting framework, the likely to be partly mollified by the high base that
more on the poor as the price of essential items, RBI is deemed to have failed in managing price lies ahead for H2 FY2023, Nayar said.
such as food and fuel, occupy a greater share in the rise if the CPI-based inflation is outside the 2-6 per The National Statistical Office (NSO) releases
consumption basket of lower income classes. “Im- cent range for three quarters in a row. Now the inflation data every month. The Price data are col-
ported inflation continues to be a concern given RBI will have to explain to the government why lected from selected 1114 urban Markets and 1181
the depreciation in the rupee and elevated inter- inflation remained above the mandated 2-6 per villages covering all States/UTs through personal
national energy prices amid persisting geopolitical cent range. visits by field staff of Field Operations Division of
tensions. This was reflected in a sequential pick- “The CPI inflation jumped to a sharper than NSO, MoSPI on a weekly roster, according to an
up in fuel inflation. We thus maintain our CPI in- expected, five-month high of 7.4 per cent in Sep- official statement released by the Ministry of Sta-
flation forecast of 6.8% for this fiscal, higher than tember 2022, with the sequential increase and the tistics & Programme Implementation.

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