Oct 12, 2017 07:20 PM IST | Source: Moneycontrol.com
Retail inflation cools to 3.28% in September as food prices remains steady
Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, continued to remain soft, with prices showing gradual improvement at 1.76 percent from at 1.52 percent in August
India’s retail inflation remained flat at 3.28 percent in September, as food prices remained steady, while fuel and housing prices witnessing modest growth during the month.
Retail inflation, measured by Consumer Price Index (CPI) witnessed 3.36 percent growth in August, while rising at 4.31 percent in September a year ago. It is the main price gauge that the Reserve Bank of India (RBI) tracks.
Consumer food price inflation, a metric to gauge changes in monthly kitchen costs, continued to remain soft, with prices showing gradual rise at 1.76 percent from at 1.52 percent in August.
"The mild easing in food inflation in September 2017 relative to the previous month was offset by the considerable rise in inflation for housing, on the back of the HRA revision, as well as fuel and light, and pan, tobacco and intoxicants. As a result of the uptick in inflation for housing, and pan, tobacco and intoxicants, core inflation rose to 4.6 percent in September 2017 from 4.5 percent in the previous month," said Aditi Nayar, Principal Economist, ICRA.
Vegetables prices witnessed nearly 4 percent growth in September as compared with 6.1 percent in August. However, prices of pulses continued to fall (-)22.51 percent in September, as compared with a contraction of (-) 24.40 in the month before.
Fuel inflation was 5.56 percent in September, as compared with 4.94 percent in August. Similarly, housing inflation grew 6.1 percent in September from nearly 5 percent in August.
"The staggered impact on the housing index of the CPI, of the revision in HRA of central government employees, is likely to push up housing inflation further over the coming year. Moreover, the pass-through of the goods and services tax (GST) to final prices of various goods and services may not be complete. Overall, we expect the CPI inflation to cross 4.0% in the ongoing quarter and exceed 4.5% in March 2," Nayar said.
Last week, the Central Bank’s Monetary Policy Committee (MPC) forecasted that retail inflation will hover around 4.2-4.6 percent between October-March this year, higher than the previous projection of 4-4.5 percent.
The MPC also maintained a “neutral,” stance, keeping the door ajar for a future rate cut if incoming data were conducive.
According to the RBI, early indicators show that prices of pulses which had declined significantly in recent months, have now begun to stabilise. Also, “some price revisions pending the goods and services tax (GST) implementation have been taking place”. International crude prices, which had started rising from early July, have firmed up further in September.
In August, the MPC had recommended a 25 basis point (0.25 percentage point) cut in the repo rate to 6 percent. Business leaders have been arguing for a repeat action to revive investment, spur spending and aid a turnaround in the broader economy’s growth that has slumped to a 13-quarter low of 5.7 percent in April-June.
The central bank and the MPC, however, made it clear that it stood firmly on the side of inflation control in the growth-inflation trade off.