Driven by elevated onion prices, India’s retail inflation picked up in October to 4.62% from 3.99% a month ago, crossing the 4% medium term target of the central bank for the first time since July 2018.
A Bloomberg survey of 33 economists pegged retail inflation at 4.35% in October. Food inflation quickened to 7.89% in October from 5.11% a month ago.
However, the rise in inflation is unlikely to deter the Reserve Bank of India from cutting policy rates in its December monetary policy review, with a set of macro-economic data pointing towards sharper than expected deceleration of the Indian economy. RBI has already cut policy rates five consecutive times, this year by a cumulative 135 basis points to 5.15%.
India’s factory output shrank for the second straight month at 4.3% in September, recording its worst show since the present series was launched in April 2012. This could mean GDP growth is likely to have slowed to less than 5% in the quarter ended September, data for which is to be released on 29 November. Economic growth rate had cooled to a six-year-low of 5% in the June quarter.
Nomura has projected September quarter GDP growth to decelerate to 4.2% from 5% in the June quarter of FY20. The brokerage last week cut its overall GDP growth forecast for FY20 to 4.9% from 5.7% estimated earlier, the lowest so far among forecasting agencies.
Supply disruption after floods in states such as Maharashtra in August led to onion prices touching ₹80 per kg in some parts of the country. After banning exports of onions and putting stock limits for local traders, the centre has decided to import the essential kitchen ingredient to curb rising prices.
“The government has decided to import 1 lakh tonnes of onions to control onion prices. MMTC will make the imported onions available for distribution in the country from 15 November to 15 December and NAFED has been entrusted with the responsibility of distributing the onions to every part of the country,” consumer affairs minister Ram Bilas Paswan tweeted on last Saturday. (ends)